Examination of Witnesses (Questions 1-19)
LORD BURNS
GCE, MR DAVID
ELSTEIN, MR
TIM GARDAM
AND MR
JEREMY MAYHEW
20 FEBRUARY 2007
Q1 Chairman: Good morning everybody.
This is the first session that we are holding on the Committee's
new inquiry which is into public service media content and its
future provision. To begin the inquiry we have invited a panel
of experts and consultants to give their own views, so can I welcome
Lord Burns, who of course advised the Secretary of State on Charter
renewal; David Elstein, who is a familiar figure to the Committee;
Tim Gardam; and Jeremy Mayhew. Perhaps I might begin by asking
you to give a slightly philosophical view perhaps about public
service content and how exactly you see it defined. Is it sensible
to categorise it into particular genres or is it better to adopt,
as Ofcom are, a more general definition, and is it simply confined
to those areas which the market do not provide or should we look
for a wider definition?
Lord Burns: Could I begin by saying
that it is a little while since I looked closely at these issues.
It is two years now since I was involved really at the heart of
this debate. Personally I am attracted by the Ofcom description
of this—that we should now be concentrating more upon content
than broadcasting. To me the notion of public service broadcasting
or public service content is high-quality material, probably originated
in the UK, which the market itself does not provide. We can debate
about that because of course one of the uncertainties in all of
this is what the market will provide. We have some idea of some
of the pressures there are going to be upon some of the existing
terrestrial broadcasters in terms of providing public service
content. What we do not know is the extent to which the multi-channel
world and other forms of media are going to generate new forms
of what we might think of as public service content. We thought
of them as public service broadcasters. Indeed, at one stage I
think people thought of public service broadcasters as being all
of the broadcasters who broadcast free-to-air and now, because
of the changing nature of this market place, people are beginning
to concentrate more upon the components that we might think of
as public service content. I am quite comfortable with that approach.
Mr Elstein: Chairman, I am here
as Chairman of the Broadcasting Policy Group which produced a
report three years ago dealing with this, amongst other issues,
and I have to say we welcome the focus of this Committee hearing
on public service content rather than public service broadcasting
or public service broadcasting institutions. Content is the nub
of the issue ahead of us. The Broadcasting Policy Group was pretty
clear that attempting to define public service content (PSC) by
its nature, its category, its origin, its means of funding was
always going to get you into trouble. You get a lot of high-quality
content which is not generated from public funds; you get a lot
of publicly funded content which is not high quality. Our view
was the test should be: will the market provide or will it not.
Our view was also that there was likely to be for a very long
time a case for public funding of public service content. The
exact quantum would need to be decided on a regular basis by Parliament
but there was clearly a case for it. The issue was therefore how
you could generate a sufficiency and a breadth and a plurality
of public service content in a post analogue age, and we are already
down the road of the old commercial public service broadcasters
being either unable or unwilling to deliver on the trade-off between
discounted or free spectrum and new public service content. We
have got to grasp this nettle of how you deliver plurality of
public service content supply in the digital age; that is the
central issue.
Mr Gardam: First, I might say
I am speaking here entirely in an independent capacity although
I should declare an interest as a non-executive director of Scottish
Media Group. I think there is some detachment from the front-line
of television and I think the coming of the digital market has
allowed us to think more clearly about public service content
definitions because we have moved beyond a system of trade-offs
which the old licensing system essentially enshrined, that mixture
of obligations and incentives through institutions which allowed
the analogue public service environments to exist. I think I have
a slight difficulty with what David Elstein said because I agree
it is uncertain what the market will provide, and it may well
provide content which used to be entirely in the domain of what
was seen as public service broadcasting, but I would not define
the public service content solely in market terms, not least because
I think the fact that television has been in the past 50 years
the greatest force of intellectual emancipation that we have known
means that we would be unwise to forget the social and cultural
purposes of television over and beyond its market purposes. I
would like us to think in terms of motivation of purposes when
looking at public service content. The primary motivation of public
service content is so that it is devised to be fit for whatever
social and cultural purposes it sets out to achieve and not primarily
there to profit maximise. I would suggest three areas which it
is worth using as a framework to consider the most important aspects
of public service content. The first is the provision of reliable
information to an informed democracy in the digital age. We are
living at a time when technology and markets are globalising but
politics is not. I think asking what news and information is necessary
for an informed democracy to function and what sort of public
frameworks should there be for that, particularly in a multi-cultural,
socially fragmented and multi-lingual society, is something that
should be kept to the fore. The second area which I think one
should consider is the need to promote individual authorship and
voice because I think one of the greatest culturally emancipating
forces of television in the past 50 years has been to ensure that
the most interesting and imaginative voices of the age are connected
to a wide audience for fresh ideas, and we have to think how that
can be maintained. The third area, which I think is as fundamental,
is to promote what I have described as "independent intelligence"—going
back to my phrase of "intellectual emancipation"—and
what does an engaged citizen need to know in order to take part
in a society where traditional points of cultural reference are
disappearing? I think one needs to stand back a bit from issues
of the market and how the content is provided to think about those
purposes because I think those purposes will be as valid and as
relevant in the world across lots of platforms as they were in
a world where there was only a television platform.
Mr Mayhew: I should probably also
start by saying I speak in a personal capacity although at various
times I have had as my clients most of the public service broadcasters.
I agree strongly with Tim that public service broadcasting content
needs to be thought of, above all, in terms of its distinctive
purposes in the market place—and I would certainly point
you to the five or six (depending on how you count them) purposes
that the BBC has been given in its new Charter, and in particular
point out that essentially we do not have this, by contemporary
standards, mammoth act of intervention in a particular sector
for essentially economic or industrial reasons; we have it for
non-economic reasons, for social, educational, and political reasons,
and I think that should be the test. I find superficially the
test "can the market provide?" attractive; however,
the problem is that if you are going to have public service broadcasting
and public service content which has impact, the balancing act
which traditionally has been performed, and I think underwrites
the sustainability of our public service broadcasters, in particular
of the BBC, the balancing act between distinctiveness and reach,
the proper balancing act seems to me to mean that it is more complicated
than saying about any particular bit of content, "This bit
of content could not have been provided by the market place."
It certainly is the case, in my view, that if you found publicly
supported or publicly funded services which could have been provided
by the market place, you should be deeply sceptical and say, "Why
are they being provided?" but I do not think it is a realistic
test to ask about each bit whether it will be provided, and indeed
the mix between distinctive and popular seems to me at the heart
of creating a proposition that has impact and delivers on the
purposes. Of course, there are some aspects once you have endeavoured
to answer that question of public service content/public service
broadcasting that can be specified and some that can be quantified—the
proportion of original programming, the amount of local originations,
et cetera, the sort of tier two type stuff within the Ofcom regulatory
system, but that is a sort of base camp. The key things are about
quality, innovation, experimentation, pushing the boundaries.
These things are inherently subjective, nebulous, et cetera, and
it seems to me—and this is I suspect going to be a quarrel
between myself and David Elstein—that you need to understand
that upfront because that is the reason why ensuring the delivery
of satisfactory, high-quality public service content or broadcasting
cannot be contractualised, cannot be specified very precisely,
and that is why you get driven back to the importance of institutions
in the delivery of public service content because in the end an
ethos inside institutions which have distinctive purposes and
remits is not some sideshow to the delivery of the proposition,
it is absolutely fundamental to the characteristic of the proposition,
which is inherently, I am contending, one which cannot often be
wholly specified ahead of time.
Mr Elstein: It is nice to know,
Chairman, that when the Church of England is at odds as to where
it should go that the priesthood of public service broadcasting
wishes to retain the mysticism of purpose but justifies unlimited
public funding with no accountability. It is reassuring!
Q2 Chairman: It does seem to me this
raises a problem though that if you are moving away from the traditional
definitions of arts, religious broadcasting, children's programming,
regional content into a much more general definition of what basically
is good for you and desirable, how do you then determine whether
or not remits are being delivered? How can you say to ITV, "Yes
you are delivering on your obligations," or, "Yes the
BBC is still a bastion of public service broadcasting," because
it becomes entirely a matter of opinion, does it not?
Lord Burns: There has been set
up a rather complex process but it has been done in some detail,
trying to specify the obligations of the BBC within this whole
area. We can look at the Charter, we can look at the agreement,
we can look at the arrangements for the Trust that have put in
place to try to deal with some of these issues on an on-going
basis. What I assumed this debate was much more about was the
issue about plurality, as David has said, which is what is going
to happen to public service broadcasting or content in the non-BBC
world. It seems to me that although it is attractive to think
of this in terms of institutions, that is not the way the world
is going. There are going to be a large number of people who are
broadcasting and the question to me is whether they are going
to continue to produce competition in the world of public service
broadcasting. Or are we going to be left with a world in which
we have a rather elaborate, detailed process which has been thought
through for many months about the obligations on the BBC on the
one side, and something which is much more difficult to specify,
much more difficult to measure, and where there are no obligations
for the rest of the broadcasting world. That seems to me to be
a big challenge. Having myself been through the process of trying
to specify the obligations of the BBC and the governance arrangements
of the BBC to acheive delivery of what we regard as public service
content, now shifting the focus to the question of the rest of
the broadcasting industry I think this is a very worthwhile thing
to do I have to say I think is even more complicated.
Q3 Mr Sanders: Looking at the new
technological age that we live in and the advances, as the market
provides more and more content, is there not a case for less government
intervention?
Mr Gardam: Up to a point. I think
it goes back to definitions of what sort of content and the motivation
for that content. What is clearly happening is that though the
business models which will eventually connect television to the
Internet are still being worked through, and I think it is uncertain
exactly how they will turn out, it is undoubtedly a fact that
at the moment the effect of the fragmentation of audiences across
the different platforms is having a major impact on the traditional
licensed broadcasters. I think one of the most telling points
that I have heard recently was made by Ed Richards of Ofcom when
he pointed out that if we are looking to the market to provide
increasingly high level content, in the 20 years since satellite
television we still have a position whereby £2 billion of
content is provided by the so-called public service licensed broadcasters
and only £100 million of original content is provided by
the other channels. It could be argued that that is the case because
the direct intervention of the BBC licence fee has been a disincentive
for that, but all the evidence that I can see is that there is
not the same incentive, particularly in a world of fragmented
attention, to invest in new, original content which will not have
the guarantee of similar returns on investment as there has been
in the past and therefore the level of intervention that there
needs to be, I think, is to act as a catalyst to incentivise that
sort of programming to be made, and the criteria that I laid out
at the beginning is a framework which will prioritise where we
need to ensure the money is invested because I think those are
the areas most likely to show what one might describe as a market
shortfall.
Q4 Mr Sanders: So less government
intervention would not necessarily lead to more content?
Mr Gardam: It is a question of
volume versus range, is it not, there is going to be unlimited
content available in the world of new media.
Q5 Mr Sanders: Maybe I should have
said new content.
Mr Gardam: The question is whether
there will be a similar range of content with the social and cultural
purposes that we have had in the past and what will the impact
be from the view of government on civic society if that content
is not available for people to use although it will be available
in very many different forms.
Mr Elstein: You have to differentiate
between what happens within a certain set of circumstances where
you have got spectrum scarcity and restricted analogue spectrum
and what happens when all of that goes. The evidence is pretty
clear that even after the analogue system is switched off, the
likes of ITV, Channel 4 and Five will have revenues north of £2
billion a year and by far the biggest item of expenditure for
them will be new, original UK-commissioned content because that
is what works for them commercially. From the viewers' point of
view it is virtually irrelevant whether there is new content on
Living 3 or Sky Sports 7; they still have the same volume of content
because they have all the original channels as well. They do not
spend their time ticking boxes as to under which heading did that
new programme come, so what you have got to think through is what
does the evidence of sophisticated broadcast market places like
ours tell us if we look elsewhere. If you look in somewhere like
the United States, even faster fragmentation of audiences than
we have experienced in the UK has led to a significant increase
in the volume of investment and new production of high-quality
content, not a very broad range of content but still very high
quality. If you look at news investment and particularly local
and regional news investment in the US, where there is no regulatory
requirement to spend, there is still an overwhelming commercial
pressure to spend at high levels. I cannot imagine that ITV after
analogue switch-off and after its analogue spectrum had ceased
to have any value or price, would give up its news services. Why
would it? It is a highly distinctive part of what it provides
to the audience. It is not going to cede that territory to the
BBC. We will not have any leverage to require ITV to do that,
but they will just do it because it is in their economic interest
to do it, so you have got to accept that as the years move forward
the way in which we intervene is likely to change, the mechanism,
and what exactly we generate out of public funding is likely to
change as well. There will be times when we just say we need something
very focused. Teachers' TV is an example. It is funded out of
the DfES with a lump of money, £15 million a year, for a
particular purpose, allocated to be spent on production, broadcasting
and Internet transmission. It is made for profit by the contractor
but still very much defined as are we getting value for money
for the DfES. That contract will come up for retendering in the
very near future and even though it has been very successful,
we need transparency, we need contestability and we need accountability
in how we spend public money on new public service content. We
have got plenty of examples of how you can mix institutional spend
and non-institutional spend already. The issue is how will that
balance change going forward. I will give you a very obvious example:
Channel 4 News—very highly valued by viewers, by
regulators and by Channel 4 itself—and Channel 4 is basically
telling us all that the increasingly competitive market place
is making it harder and harder for them to generate enough profit
from Big Brother to carry on making Channel 4 News
in the way it should be. Tim will give you a much clearer, deeper
understanding of this having been responsible for Channel 4
News. The issue for us going forward will be should we just
pour more money into the Channel 4 pot and hope that what comes
out of the spout will be Channel 4 News or should we say
to Channel 4, "Here you are, you are making £700 million
a year; in order to keep making £700 million a year you have
to commission a lot of a very popular programming. We cannot be
certain you will deliver Channel 4 News the way we would
like it and therefore if you wish to bid for a chunk of money
that will be clearly dedicated to Channel 4 News, that
is another way of delivering it. Whether you internalise it or
externalise it, we will still have similar types of assessments
to make and decisions to make, but what we need to think about
is as Channel 4, ITV and FIVE reduce their obligations to make
these kind of programmes, for good economic reasons, how do we
avoid a situation where the BBC is effectively the 90%, 95%, 98%
supplier of public service content, because in a democracy that
cannot be right. Nice as it is to have other ideas floating around
like the public service publisher from Ofcom and so forth, it
is not getting to the heart of the issue and all of us who admire
and respect the BBC and think it does tremendous work still have
to face up to a situation where if one person in an editorial
position in the BBC says this cannot be mentioned on any BBC service
about a particular government Minister, that is obeyed all the
way through the Corporation; that is not how democracy works and
so we need to address this and I hope this Committee will address
it.
Q6 Mr Sanders: That is an argument
for decentralisation of management of the BBC. These are issues
that we could be here all day discussing. It was a fascinating
answer, David, and thank you for it. I also wanted to look at
the new media outlets and whether it is possible for government
to intervene and make sure that public service content is provided.
Do you have a view on that?
Lord Burns: Could I first of all
say that I agree very much with David that in terms of your first
question this is an issue about the method of intervention. I
am quite satisfied that the method of intervention is going to
have to change. The means by which we are able to get public service
content through the licence agreements and the offset to "the
licence to print money" is going to come to an end in that
form. If we wish to intervene in the non BBC world—and that
is a question that I think does have to be faced up to—first
of all it is going to have to be done by different means. I think
the same applies to the new media. There is going to be an issue
of BBC content on the new media and some of the same issues will
emerge as to how dominant it should be. It raises the issue of
whether or not the market place will provide alternative forms
of that content for the new media, and to what extent there needs
to be some public sector intervention of a very different type
to that which there has been previously. What I would however
counsel, and I agree entirely with David, is we do not want the
BBC to be the only force in this area. But I would not write off
too quickly that some will be provided by other parts of the broadcasting
industry or the media industry because they think that it is a
worthwhile thing to do. They might think that it is good for their
branding, they might think that it is good for their image, they
might think that it will actually make money relative to what
is needed to finance it. It is very easy to reach the conclusion
that what we think of as public service content will only come
from the BBC and that everyone else will be doing various versions
of Big Brother. That is not what is likely to happen to
my mind. When you get a proliferation of channels and you get
a proliferation of media, you do get alternative suppliers. If
news is what you are interested in, on the Internet there are
thousands of sources of news all over the world that are readily
available. There is a much greater supply of news content on a
worldwide basis than there ever was.
Q7 Mr Sanders: That comes back to
my point; can a government, given that a government will be a
nation state based entity, actually intervene in some of these
new media outlets given that they are not necessarily based within
the boundaries of that nation state?
Mr Gardam: Let's consider the
position whereby public service intervention is seen to be only
within the bounds of old media and that new media is seen to be
beyond that. What we are talking about here is the use of public
money to act as a catalyst to ensure a certain set of motivations
and purposes come to the fore in the production of certain material.
I am not quite as optimistic as Lord Burns as to the ease with
which public service material will be provided by shareholder-maximising,
profit-maximising companies in the medium term because I think
the disruptive effect of the migration of advertising from television
towards the Internet is going to put considerable pressure on
traditional commercial broadcasters trying to defend a share price
where the levels and margins of profitability are going to be
squeezed, and we have seen how unattractive the media sector has
become in recent years, and so I think there will be pressure
to ensure maximum profit per slot in the broadcasting world. If
however you say that public service content should not extend
into the world of new media, you are essentially saying that the
public service imperatives that have actually shaped civic society
in the past 50 years become part of a heritage industry. I think
one of the mistakes that Channel 4 made between 2000 and 2004
when I was there was that it saw new media as a commercial opportunity
solely in order to drive new revenue streams to subsidise old
media, which was the core channel. I think in retrospect—and
I was involved at the time—that was a mistake because in
the end if you are going to have, in this case, a public sector
public service corporation such as Channel 4, it needs to have
those same motivations feeding their way through all platforms.
I think that has been recognised by Channel 4 and turned around
but I think it would be very dangerous for us to believe that
we are going to be able to make those same contacts into society
which have been made in the past through television if we just
restrict those motivations to television.
Mr Mayhew: In case anybody has
got a different impression, can I start by saying that I am definitely
with David in believing that it is critical, it is absolutely
essential to public policy, and indeed should be the priority
post Charter review to think about the way in which the BBC is
not allowed to be a monopoly in public service provision. The
danger is that as the old compact breaks down in terms of an exchange
of obligations for access to scarce analogue spectrum that the
BBC becomes a monopoly and that would be, in my view, as in most
circumstances in the public and private sector, bad for the BBC,
bad for British citizens, et cetera, so far from being
complacent about that or endeavouring to argue a case which maybe
David thought I was trying to argue for protecting a BBC monopoly,
I am certainly in favour of thinking very hard about how one creates
competition in the public service space to the BBC. I also agree
that the methods of intervention are likely to have to change
in relation to ensuring the delivery of public service content
beyond the BBC and to some extent beyond Channel 4 and, to put
it crudely, negative regulation saying "thou shalt not do
things" will not deliver the goods. It will involve an active
act of political will and positive intervention, involving I suspect
money as well, directly or indirectly, in order to get people
to do what they otherwise would not do, which of course is not
to imply, as in all sorts of other sectors of society, that private
sector institutions whose primary obligation is to maximise shareholder
value do not also deliver public value. It is not to suggest that
public benefit does not flow from the activities of the commercial
sector; it is just there may be certain non-economic purposes
that are not sufficiently delivered. It seems to me that it is
perfectly possible to be a free marketeer believing that the market
is the best engine for delivering economic growth and GDP without
believing that the market is a particularly reliable way of delivering
those non-economic purposes. I do not think there is a contradiction
between being a free marketer, broadly speaking, in the economic
arena and believing that the state has a role in delivering some
of those non-economic purposes. I want to go back to the two questions
you asked about the case for intervention in old and new media.
It is clearly the case that the public service broadcasters represent
already a much smaller proportion of the broadcasting or the media
cake than in the past. If the question is "Is the relative
case for intervention versus the interplay of the commercial sector
in decline?" the answer is undoubtedly yes, I would say,
and the market will provide more, relatively speaking. I am far
from convinced and I am not going to proffer an answer on whether
the absolute level of intervention in terms of financial support—for
example the £400 million that Ofcom has estimated was the
value of the spectrum made available to the non-BBC PSBs—needs
to be maintained. I think that is a different issue, but in relative
terms clearly the PSBs represent a smaller proportion of the cake.
Moreover, the traditional historic economic case for intervention,
which in a sense was based upon the characteristics of the market
place, scarce spectrum, high barriers to entry, the characteristics
of public goods et cetera, could be argued to be in decline
and therefore I think an appropriate scepticism not about whether
the historic purposes of the intervention have gone away, I do
not think they have, but about the appropriate scale and scope
of the intervention is appropriate I think that is probably the
challenge for the next period and I would proffer that perhaps
that question was not asked as rigorously as it might have been
over the last two or three years. You asked about new media. First
of all, the historic case in terms of the character of the goods
and the character of the market place, namely barriers to entry
and public goods, seems to me initially less strong than in the
historic broadcasting space. This is not a market characterised
by high barriers to entry. However, if one were to confine the
traditional public service institutions to old media they will
increasingly look anachronistic. Let me briefly unbundle what
is meant by new media. First of all, we are talking about alternative
means of distributing the same linear content and people use the
term both to apply to that, ie distributing content over different
distribution systems, and to new sorts of content—user-generated
content, et cetera. It seems to be that the case for delivering
the old content over multiple platforms is pretty strong in order
to have the same impact historically. I think the case for public
support for such things as user-generated content needs to be
made. One caveat: if public service content is to continue to
have universal appeal and deliver universally it needs to reach
young people, and we know already the consumption of traditional
media is in decline among young people and is often being displaced
by consumption of new media, and therefore to get to those people
you may need to use new media vehicles.
Q8 Rosemary McKenna: Good morning,
gentlemen. The Government is committed to plurality and we have
all agreed, I think, this morning that it is absolutely crucial.
Ofcom have identified three areas where they think it is most
important—production, commissioning and the outlets (who
distributes, how the programmes get to the consumer). What would
you say of those three is the most important in terms of plurality—production,
commissioning, or the outlets?
Mr Elstein: The outlets are, hopefully,
all interchangeable in terms of their collective impact. Jeremy
Mayhew mentioned the word "impact" and it is an important
issue when you do commission public service content how much reach
will it have and what are the arrangements for distribution, but
I do not think they are a defining characteristic of pluralism.
I think the source of content, the supplier, is very important
and I think the commissioning process is at the same time very
important. If you only have one commissioning body which is also
a broadcaster, you are inevitably narrowing the process whereby
the multiplicity of ideas can compete. If you track back to when
Channel 4 was created it was deliberately created to be a light
commissioning structure with nil or virtually nil in-house production
which would commission from hundreds of suppliers—I think
it is probably less than hundreds these days—but that was
a way of generating a multiplicity of voices and also having competition
for what was in effect public funding. Originally it was money
diverted from ITV which therefore never got to the Treasury. Later
it was money that might have been paid for spectrum but as the
spectrum was given for free it was another way of delivering public
money, so the fact that there was a Channel 4 as well as a BBC
gave you at least some extension of the commissioning plurality
that you need and the fact that there were many other suppliers
and now the BBC is also commissioning from independents gave you
plurality of supply. I do not think there is any problem in having
plurality of supply in the modern age—there is a huge number
of would-be suppliers—even if the BBC were the only commissioning
body. I think the real difficulty is if the BBC becomes overwhelmingly
the core commissioning body. The one thing I would just say is
that the BBC is in receipt of well over £3 billion a year
of public money, but I think it is realistic to acknowledge (sophistry
to one side) a great chunk of that money is spent on very good
quality entertainment. You do not have to apply the label "public
service content" to Strictly Come Dancing or even
Dr Who. Great, we all need high-quality entertainment but
if you try to nail down the stuff that the BBC delivers, and BBC
Television delivers in particular, that could not be supplied
by the market (and, by the way, Blue Planet could be supplied
by the market, it is a highly marketable production) it is probably
£500 million to £1 billion out of that £3 billion,
so if we look at how to replicate the £300 million to £400
million a year that Ofcom has historically looked at as coming
from the commercial sector, which is the trade-off between reduced-cost
spectrum and the programmes they generate, how would we find £300
to £400 million of non-BBC cash to be spent on public service
content? That in a nutshell is the challenge. I have suggested
in my note to you one mechanism for doing that, which is something
we have anticipated might be the case, but the value of the DTT
spectrum that is being created inside the UK which will not be
needed by the BBC clearly has a cash value. There may be other
mechanisms. I would have strongly endorsed the Burns Committee's
Public Service Broadcasting Commission idea which is very similar
to the BPG Public Broadcasting Authority, which is something which
only focuses on public service content, has no other interest
in the world, does not have a stake in a broadcaster, does not
have a stake in new businesses or anything, just wants to look
at the world of content supply and say, "What is missing?
What is not there? What is not good enough? If we had £300
or £400 million a year what are our highest priorities? How
do we deliver it?" Maybe one day the BBC will not be wholly
funded by the licence fee, which was another recommendation of
Lord Burns' Committee, and it too will be able to participate
in this central funding and be part of the contestable, transparent,
accountable version of public service funding for content that
we are looking at. If you want a quick intervention decision it
is how do we find the money and how do we allocate the money in
the future, the point I was making about the difference between
internalising and externalising, putting it into institutions
or putting it into a stand-alone body, and how do you make sure
that you have enough non BBC commissioning and distribution of
public service content to keep a democracy healthy. I do not think
you would find any disagreement amongst the four of us as to why
you should do it. Tim has expressed it extremely elegantly but
you do not have to be an Oxford head of college to adopt those
principles in terms of nurturing our intellectual and public life.
For good reasons that is what our broadcasting system has managed
to do and we would be nuts to let that go. What this Committee
and governments have to think their way through is what are the
mechanisms, how do you lay hands on the funding, how do you put
the two together.
Lord Burns: I very much agree
with that. I stand by the recommendations that we made in the
report (and of course Tim was also a member of that group) which
is that we need to identify which is the content that is missing,
which we would like to see more of on non-BBC outlets, and then
to have a body which has some funds which is then able to commission
programmes in a contestable way. Alternative people would have
to bid for that money to fill what has been judged to be the gap
between that which we would like to see and that which we think
the market place will deliver. It is not an easy job and it will
have to be approached over a period. But it seems to me that that
is the best mechanism that I can think of which will give us the
basis for being able to make some of these judgments and being
able to generate the necessary competition in the non BBC space
to provide that type of programme.
Mr Gardam: You will not be surprised
to find that I very much agree with that, being a member of Lord
Burns' Committee. In direct answer to your question, clearly what
matters most is the plurality of ideas and plurality of ideas
will be most likely to happen through plurality of commissioning.
We have also to think of the impact of the ideas and there the
issue of trusted brands is quite important when we come to outlets.
Ofcom have identified two areas at the moment in very practical
terms where the issue of plurality has to be addressed. One is
the future funding of Channel 4 and the other is public service
publishing. To my mind the issue of Channel 4 is a prior question
to that of public service publishing because the Channel 4 issue
which is within the wider framework that nobody else seems to
be talking about of ensuring that there is true contestability
for public service content. Channel 4 has identified a £100
million gap at the time of digital switchover between where it
is now and where it will be then. It may be hard looking at Channel
4's apparent profitability and riding high as a brand to believe
it, however, I think one of the interesting things looking at
Channel 4 from when I began my association with it in 1998 is
ever since that moment when we saw the impact of fragmentation
coming, we were looking at that time to find other sources of
income beyond that of spot advertising revenue. Try as it has
today still 95% of its income comes from selling advertising into
the main channel, and indeed as the shift from television advertising
to Internet advertising has taken place, the impact on Channel
4 in terms of its creative endeavours has been that although it
has increased its number of channels, it is reducing its investment
in original content on its digital channels because it can sell
its advertising at a higher premium on its original channel, so
Channel 4 is still caught in a funding gap. That is why Channel
4 has taken the quite risky decision to say, "We will need
public money." I think that is an immediate focus for contestability.
I think it will also have impacts on Channel 4 because I think
it would lead to much more rigorous questions being asked about
Channel 4's governance than have been asked in the past because
in the past Channel 4's governance was seen almost to be innately
enshrined in its means of production, its use of independents,
its commitment to innovation and fresh ideas. The opening of the
market in production companies and the fact that production companies
are allowed to keep their rights to build their businesses has
changed the motivation it all sorts of ways. It has been a good
thing for production companies that they have consolidated but
I think there will be an issue if Channel 4 does take public money
about how it will account for the uses of that public money so
that it is not seen as just a manoeuvre, and I think that is something
which is yet to be addressed. I think though that the assurance
of a public sector, public service competitor to the BBC as a
trusted brand (and Channel 4 is a comparable brand name with the
BBC in this country) is the first order issue. The issue of whether
you need a new catalyst into the new media world of public intervention
which is what a public service publisher is meant to be, is a
secondary issue. I think there are lots of pros and cons about
that that we may discuss but I think we should not lose sight
of the key issue of Channel 4's role in public funding and hence
I think the inexorable drive towards contestability.
Q9 Alan Keen: Obviously this session
is of great advantage to us to set the scene really. We could
not have had anyone better. I am sure you would agree! It would
be good if each of you in a couple of sentences were to define
what public service broadcasting is. Is it what the market cannot
produce? The market could produce Blue Planet but many
would not be happy to make that size of investment and would want
a more short-term return. Is public service broadcasting what
is good for us that we would not watch purely for enjoyment? Could
you give us a brief definition.
Lord Burns: I think it is about
high-quality material. I think it is probably about being originated
in the UK. I think that it does have to have a good reach in other
words, it is not a question of putting on this material at 3.30
in the morning on some minority channel. And it should be reasonably
modestly priced. But, above all, I do think in the age that we
are moving into, where there is going to be this huge multiplicity
of channels, it has to be defined in terms of those things which
the market place is not going to provide. Otherwise we are into
a long and very complicated debate about what these things are.
Ofcom have identified some categories which I think is a starting
point—news and current affairs, some issues about arts,
some to do with science, some to do with history, some to do with
the whole issue of democratic accountability. But within these
categories as we know, quite a lot of this material is going to
appear anyway. I think it has to become a judgment as to whether
it is of sufficiently high quality and whether there is enough
that is generated and originated within the UK. Here of course
the US market and the UK market are quite different in terms of
their audience sizes and therefore some of the economics of this.
The other thing I would say about this notion of public service
content is that because of the type of definition, which I am
supporting, it is inevitably going to be a shifting target because
you will only discover over time how things are going to emerge.
I would stress the uncertainty. At the moment we are in this halfway
house between the analogue world and the digital world, between
some people who have a restricted number of channels, and some
people who have a lot of channels. And it is quite difficult to
think yourself forward about what it is going to be like when
everybody is in the position of having a large number of channels
and where there is quite a lot of content on offer. And at that
stage issues about quality, variety and UK origination, may become
bigger issues than simply whether or not there is enough news
on television or on the radio.
Mr Elstein: We have got to recognise
where we are sitting between the past which was driven by public
service broadcasters, who have wrapped up all their content (and
there are only four of them because of course we had limited spectrum
and that is all we could do) and therefore they had to deliver
a wide range of content, whether it would have been delivered
by market mechanisms or not, and therefore we got into the habit
that everything the BBC produced was public service broadcasting.
In the future, after analogue switch-off, we are much more focused
on public service content (ie stuff that otherwise might not happen
if we did not intervene), and I think that is the key differentiator.
It does not mean that you do not want public service broadcasters.
Having public sector broadcasters like the BBC and Channel 4 is
probably quite good for our broadcast ecology and for our citizenship,
making sure that they keep to the mark is one of the things that
Ofcom is charged with, but I just think that we can fall into
a category error if we drive too far down the road of, "Anything
the BBC produces is public service content", even The
Weakest Link, and it is not really an argument worth having.
That is a function of funding, not a function of anything else.
Once we get to a stage where the key differentiator is between
what we know the market can or will deliver and the huge range
of content the market delivers—Artsworld delivers a whole
package of arts content—actually I think it is going to
be renamed Sky Arts soon—not a lot of it original, but brought
in from around the world. It is excellent to have it there. Nobody
funds that other than Sky's own subscribers and the advertising
market, and so, looking forward, I think Terry Burns is absolutely
spot on. We have got to be cognisant of the fact that what will
be defined as public service content will change over time and
we should not intervene unless we need to. We should not officiously
strive to keep alive that which is about to be consigned to the
past by analogue switch-off, which is a wonderful, limited spectrum,
broadcasting system, many of whose characteristics we want to
carry into the new age but whose fundamental structure is utterly
different from what we will be facing in the future.
Mr Gardam: I think that is very
true. However, I would add that the market continues to go through
huge disruptions as a result of fragmentation and convergence,
and one of the principal drivers of what we have seen as public
service content in the past has been a preparedness to invest
in ideas over and above maximising the return on that investment,
and that, at the same time, has led in the past to a diversity
of ideas and a widely available range of ideas. I think if you
talk to people working in the sort of positions I used to work
in as the directors of content, there is no doubt that the ability
to maintain the funding at the same sorts of levels of assumptions
and what is fit for purpose of a range of content is increasingly
pressured. If you look at what is happening to television at the
moment, the established channels are increasingly reliant on particular
brands getting bigger and bigger which are increasingly priced
higher and higher and, in terms of the public sector broadcasters
(and I am speaking here from a Channel 4 perspective) the need
to pay the market price for those brands is curtailing freedom
to invest in other types of programming which probably will not
make money at all. Channel 4, until the coming of multi-channel
television, and a very simple model really, very cheap and variable
programmes made it lots of money and that money was used to make
interesting programmes in the UK market which were not very widely
watched. Then, in the first five years of this century that changed,
Channel 4 started to have to pay close to the market price for
American programming because of the multi-channel competition,
but it changed the types of programmes it made in the UK market
to make those more competitive. Now there is a market in UK content,
Channel 4 is finding it is having to pay higher and higher to
maintain its rights and its ownership of UK content. All this
is creating value, but at the same time it does mean that the
money available (as it was under the old system) to ensure that
you had a well-funded range of other programming is year by year
being diminished, and that is certainly the experience of the
people who are commissioning at the moment.
Mr Mayhew: I would endorse what
Lord Burns said that financial support beyond the BBC should be
focused, insofar as one can discern it, on what the market will
not provide. Given what I said about institutions earlier, I would
reinforce what Tim said about the priority being Channel 4. It
would be nice to have public service competitors beyond the BBC
and Channel 4, but it would be mad to pursue new institutions,
it seems to me, while letting Channel 4 give up on public service
content. That will not happen in a Big Bang way but salami-like
as it becomes more and more dependent on the big brands that Tim
referred to—you can see them slipping away—and I think
that what I would say is that the more public service players
is not necessarily the better. In this fragmented world, you need
intervention which has impact. There is some danger in spreading
the non-BBC money too thinly and actually getting lost in the
crowd. Therefore, I would argue that the first priority, very
strongly, must be to find ways in which Channel 4 can be an effective
public service broadcaster content provider with impact when competing
with the BBC. Over and above that, it is nice to have and an absolute
priority keeping Channel 4 at the public service table.
Chairman: We are already over-running
and a number of my colleagues still want to come in. Can I appeal
for brief answers, if possible.
Q10 Janet Anderson: Sky's acquisition
of a stake in ITV was not mentioned in evidence to us by either
Sky or ITV, but other evidence did suggest that it would result
in a reduction in plurality. Would you agree with that?
Mr Elstein: Bear in mind that
I am a director of Virgin Media, though I have in the past also
been Head of Programming at Sky. I think the issue largely centres
round news provision and whether Sky News and ITN are going to
cease to compete with each other under these new conditions where
by far the largest single shareholder in ITV is Sky. Bear in mind
they had previously competed with each other for the Five News
contract, for the Channel 4 News contract, so the only
issue for me that substantially arises here in terms of plurality
is whether we are going to end up with two national news suppliers
rather than three. Therefore, you might look at this in terms
of specific remedies rather than broad remedies if you are imagining
what intervention might be needed.
Q11 Janet Anderson: Do you think
that would be a good thing or a bad thing for the viewing public?
Mr Elstein: I have heard a former
Head of Sky News years ago at dinner with the Secretary of State
saying that actually it would be good for the UK to merge Sky
News and ITN because they are both sub-optimal competitors to
the BBC and better to have one strong one than two weak ones.
There are a number of different ways you can approach this. I
do not think there is an absolute rule of thumb which says: "Intervene
to make sure that X does not happen." You have got to take
a rounded view.
Mr Gardam: I was going to say
that of course ITN does not just make news for ITV, it also makes
Channel 4 News, and I think the impact of Channel 4
News over the years has been very important to the overall
use of ecology in the UK and I think one would have to think hard
about whether one would want just to see two news providers providing
news across all our public service channels. Equally, it would
be Channel 4's decision, if it so wished, to look for other means
of providing its news, through Reuters or someone, but I think
it is not just, in terms of news provision, an ITV/Sky issue.
Q12 Mike Hall: Can we can deal with
this with quite brief answers because we have touched on funding
in a lot of the other answers that we have had this morning, but
just to start off, the BBC licence fee produces just over three
billion pounds. I guess the vast majority of licence fee payers
are more interested in entertainment than public service broadcasting.
Would that be anathema to you, gentlemen?
Lord Burns: What people want from
the BBC is outstanding television and they want outstanding radio.
I think, as I said earlier, we have been through a long and elaborate
process of consultation and deliberation as to what the remit
should be for the BBC and how we make sure that that remit is
implemented. But my view is that people enjoy the BBC for a range
of reasons. They want to see variety of programmes and they do
not want to see the same programming that they can see on other
stations. Nevertheless, it is patently obvious that the programmes
which are most watched are the ones that are most similar to the
programmes that you do see on the other channels. In my definition,
along with David, I would argue that not all of what is produced
by the BBC is what I would describe as public service content.
It is a much broader service than that. It is providing a wide
range of programmes and it is important that there is a good offering
which has a big reach that attracts quite a substantial range
of people to watch it on a systematic basis.
Q13 Mike Hall: To put a direct question
to you, we have got the licence fee that brings in money?
Lord Burns: Yes.
Q14 Mike Hall: We have also got the
indirect subsidy of free spectrum?
Lord Burns: Yes.
Q15 Mike Hall: Should we also be
looking possibly at subscription instead of those two exclusively?
Lord Burns: Part funding of the
BBC?
Q16 Mike Hall: Yes.
Lord Burns: The argument that
Tim and I and others made in the report that we put out during
the process was that over time we are probably going to have to
move to a mixed funding model. My personal view is that this is
probably the last Charter period when we will have a licence fee
in this form which is the sole source of funding of the BBC and
that, as we move into the multi-channel world and we get past
digital switchover, there is going to have to be quite a significant
change in the balance of funding.
Q17 Mike Hall: If public funding
should be extended beyond the BBC, should the Government now bring
forward their review to see whether that can be done at this moment
in time rather than waiting for digital switchover?
Lord Burns: There is an issue
about just how quickly you need to start again on that. I did
have some concern that we could spend our entire life looking
at the BBC. It could be like building the Forth Bridge: you just
finish one section and you start on another one. I think it would
be a bit of a mercy if there actually was a period when we stood
back from this, as long as it is done in time to be able to get
in place a workable system for the future beyond digital switchover.
I can see what could happen. Some people would like to push the
whole thing further and further on so that the amount of time
available for looking at alternatives would be restricted. I think
it is important to have the time, to have the investigation, to
have the inquiry, and to think about alternative ways of doing
this in good time, but not over hastily.
Q18 Mike Hall: Surely the case is
pressing now, because if we want plurality and we want to make
sure that Channel 4 continues to be a public service broadcaster
(and they are all crying out for funds now), they cannot wait
for us to have another review at some time in the future.
Lord Burns: The licence fee has
now been set for—
Q19 Mike Hall: Too long!
Lord Burns: —several years
ahead. That is a decision that has been made. We are going through
a period where some of the licence fee, of course, is going to
be diverted towards more general public expenditure purposes,
if I can describe it as that, in the form of supporting digital
switchover costs. At that point I think that, serious consideration
will have to be given as to whether or not some of the licence
fee, or public funding, should be used to support public service
content elsewhere. As David has said, the proposals we made were
to have a body that would be in a position to be able to move
in that direction as time went on. It is now going to have to
happen as a result of a mid-term review, and that is where we
are headed. I think it is very valuable that you as a committee
are starting to get this ball rolling now and are beginning to
get people to think about these issues?
Mr Gardam: I think what we have
to consider is, if the BBC were less influential in our society
would our public life be better?
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