Examination of Witnesses (Questions 100-119)
MR DARREN
HENLEY, MR
SIMON COOPER,
MS LISA
KERR AND
MR KEVIN
STEWART
27 FEBRUARY 2007
Q100 Mr Evans: There are a lot of
music festivals around the country, like Ribchester Music Festival
in my constituency, which is brilliant. You think that you would
like the opportunity, the means, basically, to be able to go out
there and broadcast this, to share it with the wider country?
Mr Henley: Yes, and especially
with the regional orchestras; if you look, they are all publicly-funded
through the Arts Council and actually that Arts Council money
would be going further if we took it to six million listeners
each week.
Q101 Mr Hall: In various answers,
you have all touched on the dominance of the BBC in the radio
industry. Figures show that £630 million spent by the BBC
represents 55% of the total spend on radio, and strangely enough
the BBC has 55% of the listeners. Is the BBC too dominant in the
field of radio now and what would you like to see change?
Ms Kerr: Certainly it is dominant,
yes, of course we would think it is too dominant, but we will
do our level best, through creative programming and serving our
listeners, to make sure that we redress that balance. The BBC
does really impact on our ability to do all sorts of things, delivering
public service content, recruiting great talent, launching new
services, and so on. The BBC Trust has got to be a really important
step towards change and already we are relatively encouraged.
Their first Public Value Test was a good first step and we think
they handled the Market Impact Assessment with Ofcom well. The
more the BBC attracts audience obviously the more difficult it
is for us to attract audience, and therefore advertising, and
therefore to invest in public service content. You will probably
be aware that we have had significant concerns particularly relating
to Radios 1 and 2 but also relating to the BBC's propensity to
secure exclusive rights for sports and other events. We do not
think that securing exclusive rights is in anybody's interest
because naturally it pushes up the cost of the rights and restricts
the number of people who can listen to it. I think probably one
of the best illustrations of our concerns is, if you look at the
current consultation on public purpose remits and service licences,
which again, in principle, is something we welcome, but if we
look at, for example, sustaining citizenship and civil society
and how that is reflected in Radio 1's draft service licence,
the public purpose remit says that the BBC should "build
greater understanding of the parliamentary process and political
institutions governing the UK; it should help all its audiences
understand how the UK is governed". Radio 1 and actually
1Xtra are the two stations on radio which the BBC uses to target
young listeners. You may well argue that young listeners are perhaps
the most politically disenfranchised and least engaged in the
democratic process, and yet when it comes to how those stations
should deliver sustaining citizenship and civil society there
is absolutely nothing in Radio 1's draft service licence conditions
which describes how it should help young people to engage with
the democratic process. In fact, all it says is that Radio 1 should
broadcast a particular amount of news, sport and current affairs
each year, and the amount that it says Radio 1 should broadcast
is bettered by almost 70% of commercial radio stations, and we
do not take £30 million of public money to do that. We think
there is a really significant disconnect between what the Charter
says the BBC should be providing, which is that its principle
duty should be to deliver the public purposes, and we support
that utterly and we think those public purposes are just right,
but the way those are then translated into what the BBC is being
asked to do, there is just not a connection there. The danger
for consumers is that, unless the BBC is required to deliver those
public purposes at times when the most listeners are accessing
their services, the more they will use non-public-purpose programming
to draw listeners to their services, at the times when we are
required by our formats to deliver the maximum amount of public
service content. Kevin's stations cannot chuck their public service
content at nine o'clock at night; his format says his extended
news bulletin has got to be at eight o'clock in the morning. If
we are not having the listeners at those key times then our ability
to deliver that public service content will diminish and the whole
principle of a pluralistic PSC ecology will die.
Q102 Mr Hall: You have covered quite
a lot of ground really, in that answer.
Mr Stewart: I am convinced that
the BBC has the same business plan as Tesco, actually: they dominate
it nationally and now they are rolling it out more and more locally.
I see a station like Dream 107 as part of the old traditional
high street, where we are serving local people and delivering
what local people want and know instinctively what people want.
The BBC, just like Tesco, is diversifying, it is now saying, "Let's
open a BBC Express down the road," and poor old Dream 107
will not survive, and then they diversify into other markets and
dominate those before we have a chance to get into them. I think
the most difficult thing for us is the BBC has the public funds
and knows where its income is coming from; we have very little
forward visibility, our forward visibility in terms of investment,
and we have shareholders. We have to say, "By the way, we've
invested in DAB and that's X amount and we haven't got a return
from that yet; and, by the way, now we are across several platforms,
internet, pod casting, and all that, it's not mature enough yet
to get reasonable returns from it." The BBC can go ahead
and just roll this guaranteed income into it; we have to go back
to our shareholders and convince them that this is all a good
idea, to do this. So far, we are doing it. It is tough out there,
it is very tough, and the smaller the operator, where you have
fixed costs such as transmitters, all these things, which do not
vary much between a station which is serving 150,000 and a station
serving 500,000 people, a lot of the fixed costs are pretty much
the same. It is tight, with the dominance of the BBC and their
ability to march boldly on into this brave new digital world while
we are scraping around getting money out of the diddy-box until
we find out how we can fund our website.
Q103 Mr Hall: Basically you are saying
there should be a cap on what the BBC spends on its activities
in the radio sector?
Ms Kerr: In the way that we respond
to the consultation on service licences, which includes an element
of budget, we will make it clear that we think the way in which
the BBC's budgets on radio are presenting those service licences
give it too great a flexibility.
Q104 Mr Hall: The question was different.
As commercial radio expands, what should the BBC be doing less
of?
Ms Kerr: I think it is about what
it should be doing more of. I think it should be doing more of
focusing on delivering its public purpose.
Q105 Mr Hall: I get your point about
Radio 1 and its public service broadcasting content, I understand
that point.
Mr Stewart: I think that is a
very difficult question. In practical terms, the BBC raises the
ante in terms of staff costs. In north Norfolk, we serve 90,000
people, with North Norfolk Radio, and, strangely enough, when
we came on air, suddenly the BBC put in a new transmitter to serve
Cromer, which is a core part of our area, and BBC Norfolk have
been around for years but we pop on air and a year later suddenly
there is a new transmitter for Cromer. Actually, because they
pay more, or do not negotiate as hard as we do, because they do
not have to earn their cash, it affects us. For example, we have
little relay transmitters on a water-tower; the owners say "That'll
be five grand, BBC" and they pay it. We are paying only three
and a half, but when we go to review they say, "Well, the
BBC pay five grand, that's the market rate now." It is across
some of the areas that the BBC affects us, and £2,000, for
North Norfolk Radio, which has not made a profit yet and is supported
by Tindle, is a lot of money.
Ms Kerr: To answer your question,
I do not think it is unreasonable to suggest that if a market
is getting bigger, more diverse, providing consumers with more
of what they want, the level of the market intervention need not
grow and indeed could diminish.
Q106 Chairman: Would it help if you
took Radio 2 and perhaps transferred that by advertising the franchise,
and giving the right to broadcast that kind of content to a commercial
station rather than the BBC?
Ms Kerr: Privatisation of Radios
1 and 2 is not something which the commercial radio industry has
ever called for in the past, but there will be people within the
industry who could see that could be a benefit in the future.
Chairman: Very diplomatic.
Q107 Mr Sanders: Coming back to local
radio, if the BBC did not operate local radio stations would the
commercial local radio stations, one, interview the vet, because
I know I have heard a vet being interviewed on BBC Radio Devon,
and, two, would the play-list get wider?
Ms Kerr: I think we recognise
that in local radio we exist largely complementarily with BBC
local radio. We have a pretty good understanding that what BBC
local radio provides is not something which is necessarily commercially
viable in the local market place and we do not tend to tread on
each other's toes too much. Of course, there are exceptions, and
we have regular conversations with the BBC about them, but we
think that within the local market-place, by and large, the balance
is about right. I am sure if you spoke to BBC local radio management
they would tell you they have a play-list as well which is shared
across all their local stations.
Mr Cooper: Maybe a play-list of
songs appealing to a more mature audience, but it is still a play-list.
Q108 Mr Sanders: A more diverse play-list?
Mr Stewart: I can speak from experience,
and comparing like with like; in the Channel Islands, in Guernsey,
I did The Breakfast Show for BBC Radio Guernsey for some
five years, and The Breakfast Show, generally, on BBC local
stations, as you know, is speech-based and then they go into their
music-based programming. There was a definite play-list which
we worked to, at Radio Guernsey, which was prescribed from London.
In terms of that market, Guernsey, where we were both broadcasting
to exactly the same audience, in the 14 years that Island FM has
been competing with the BBC, every single thing which has involved
a social initiative, up until last year, when suddenly the BBC
decided it would get involved in a scanner appeal, has been initiated
by Island FM. We raised £120,000 for Christmas lights, we
put on a special station when Guernsey hosted the Island Games,
all the fund-raising, Help a Guernsey Child, was done by Island
FM, any social initiatives. I can give you full details; but over
the years all of the public service broadcasting was provided
by Island FM, not the BBC, and that is like for like.
Q109 Mr Sanders: If the BBC was not
there, it would change your programming output in the commercial
sector and you would become more local radio than you are at the
moment in relation to play-lists and guests?
Mr Stewart: I do not think it
would change. We are what we are. It is a straightforward business,
it is the way we drive our audience, by being local. I think there
are varying degrees of how locally-focused you are, and that depends
on the size of the area to which you are broadcasting.
Mr Cooper: The BBC local radio
has some rather unusual areas, in some areas, linked onto old
counties, or whatever the area might have been administratively
at the time when the station was set up. Local commercial stations
are very good at working out what their local area is because
they talk to their advertisers all the time; so if the advertisers
say, "Well, actually, nobody ever drives from Taunton to
Bristol to buy a sofa," or something of that nature, then
you know there is no point in introducing news from Taunton in
your Bristol radio station, so it is a very good thermometer for
where the localness boundary is. Kevin is very lucky in having
radio stations where you know that you are not local because your
feet have got wet, it is a bit outside of your boundary, but most
areas do not have that benefit.
Q110 Alan Keen: I am not unsympathetic
to the case you are making, you have to fight your corner, but
I think it is ironic that we have criticised the BBC for acting
like Tesco and usually public bodies are criticised because they
do not act in the interests and drive forward what are their aims.
I think it is great that the public are represented by someone
who does operate in as cut-throat a way as Tesco, personally;
it is my money they are spending. On the same subject really,
advertising is dropping, it is forecast and it is happening; it
is going to the Internet. I was going to ask is there a case for
some public funding for niche broadcasting, like jazz, and I am
a great jazz fan, and I am as delighted as Nigel is, but in a
way you have not done the case already for public money going
in to help niche broadcasting. The BBC puts out jazz but obviously
limiting the amount of time it can put it out. If I am driving,
I love to be able to get jazz, if I want to, and there is something
special about getting a broadcast and not knowing what is coming,
rather than just pushing CDs in the car; but really you have knocked
down the argument. You are confident that you are going to be
able to make money out of it whereas Jazz FM did not: why can
you do it and Jazz FM could not?
Mr Henley: We have national scale.
The ownership means that we are running it very much as a sister
service to Classic FM, so it will run with the same back-room
team, if you like, and we have GCap Media as our owner, which
is the largest commercial radio group and there are huge economies
of scale there. Also Jazz FM launched at a time when commercial
was not as developed as it is now, and you see a very strong,
developed industry but there are still some ways in which we would
like to develop ourselves, but in 1990, when it launched, it was
a very different world from the one in which we find ourselves
now. We feel that some of the programming expertise that we have
learned from Classic, where it was perceived as being a niche
music format, we were told it could not possibly succeed, we can
replicate that learning with jazz, and we believe it can be successful.
There are always levels that we can do, and with extra funding
in certain areas it means we could do things which otherwise we
could not, and that was the suggestion with things like the live
concerts for classical music.
Q111 Alan Keen: Is it your intention
to have people presenting theJazz?
Mr Henley: It will be presented.
Q112 Alan Keen: Are you confident
that you can make this niche aspect work, as it is going national,
and you are cross-advertising other programmes on one, because
I like classical music as well, so that is an advantage? You are
saying that there is still a case for some public money going
in to help you put concerts out?
Mr Henley: We are talking about
levels of programme investment and levels of public service investment.
We may well identify some areas which we feel otherwise we could
not afford, actually, physically, to broadcast; we could do if
there was funding which came in. It is never a foregone conclusion
that any radio station is going to be profitable, but absolutely
we believe that we can make it so, in time, but it will be a radio
station which is launched on a considerably lower budget than
any of the BBC digital radio stations.
Q113 Alan Keen: Are there any other
areas where public subsidy may be an advantage to the public?
Mr Stewart: I have some direct
experience of it, because we have a radio station which serves
small communities in the Midlands of Ireland, around Athlone,
Laois, and what have you, and we have received funds from the
BCI to produce a series of documentaries on the history of the
Midlands in Ireland. How that helps is that your normal journalists,
for example, are doing the day-to-day business of running that
newsroom, providing the news and all the normal things that you
do in a day-to-day business; when you receive that extra funding
it means that you can get some extra team in. Whether it is an
independent producer or the radio station itself then you have
that funding to do maybe a series of short-form programmes, or
a longer programme, depending on the sort of format, to do some
extra things which perhaps normally you just do not have the resource
to do. I have got direct experience of that.
Q114 Alan Keen: Quite a number of
people who have been successful in the industry have started by
broadcasting voluntarily on hospital radio; quite a few well-known
presenters started there. Is there a case for coming down another
level even with local broadcasting?
Ms Kerr: We see that probably
quite a lot of the big broadcasting names started their life in
local commercial radio. The flow of talent in radio is almost
exclusively from commercial radio to the BBC, for example. I think
our main concern about funding, going forward, notwithstanding
the excellent examples that my colleagues have given of how funding
could be used, is that the immediate threat our industry faces
is of increasing costs, never mind increasing funding. Darren
has talked eloquently about theJazz's investment in creativity
on the new DAB platform, but DAB is threatened with spectrum pricing
in 2012, a whole new level of tax on our operating costs being
brought in for DAB even before it is brought in for digital television,
which, as you know, has benefited enormously from Government support
for television switchover. Our real concern is that, before anybody
even considers whether or not we should be given some grants to
expand our public service content, the existing public service
content which we provide could be threatened because of this new
tax which Ofcom is proposing to introduce to our industry from
2012.
Mr Henley: The most expensive
elements of programming often are those with public service value,
and that is something we have to invest in. One of the things
which, at Classic FM, we have thought deeply about is the idea
that potentially public service broadcasting could be given some
sort of monetary value, and although we share the concern about
any further spectrum tax coming in, potentially that value could
be offset against any spectrum charging which came along.
Q115 Chairman: If I may follow that
up, Lisa, you have talked about the rising cost pressures and
particularly the possibility of having to pay for spectrum coming
in. At the same time, the revenues coming in to commercial radio,
you have seen a declining share of total advertising spend going
into revenue and advertising spend itself is declining. There
are some commentators who regard the outlook for commercial radio
as pretty bleak: do you share that view? How serious is the problem
facing commercial radio now?
Ms Kerr: If we look at the six
big players, at the moment, Emap has issued profit warnings, Chrysalis
is looking at its business options, extensive reporting of merger
talks between UTV and SMG, and GCap has had some torrid times
of late. I am sure they will not mind me using that expression.
That is five of the big six, and the only other big player being
GMG; its rather unusual structure means that it is somewhat immune
from similar pressures. There is no doubt that the industry has
been having a difficult time and we have talked about local stations
handing back licences. We think there is a good deal of cause
for optimism going forward and that is one of the things which
RadioCentre is working on, not least because we think radio has
a great place at the heart of digital convergence. If we can make
the right kinds of investments in being on new digital platforms
then radio's unique strengths of being everywhere and of being
an accompaniment medium will see it really well placed in a digital
world going forward. I am sure you all experience the incredible
barrage of visual messages we get and the impossibility of keeping
in touch with everything and with all the different devices. Radio
is great because you can consume it while you are doing other
things, driving the car, doing the dishes, and that will not change.
If we can make that migration to digital effectively and to a
multiplatform digital future, including internet, DAB, DTV, possibly
DRM as well, mobile `phones, mobile television, if we can do all
those things then we think we have a really strong future. I guess
we are asking the Committee to consider the freedoms that we need,
in regulatory terms, in ownership terms and in terms of the competition
we face from the BBC, to be able to make that investment and to
retain radio's very special place going forward.
Mr Stewart: I think, if you add
spectrum pricing onto DAB, which most small stations cannot afford
at the moment, that is still a problem in looking at a way of
getting small stations into the digital world; if you add spectrum
pricing on top of that, there is absolutely no hope. What consumers
will lose is their high street radio station, these highly-focused,
small local stations which deliver a huge amount of public service
content. We are getting kicked from both ends really, because
we have got a fair amount of regulation still in place, which
does not help us make best use of our existing resources and use
those to provide that content well, then we are looking ahead
not very far at the possibility of spectrum pricing and an uncertain
future of how we migrate onto digital. If you were investing,
would you put your money in it; it is very difficult. There is
a lot being asked of us and yet we are delivering.
Mr Cooper: It is a great medium
to be in but the context has to be right, and I think that is
what we are very glad that you are considering.
Q116 Chairman: There is speculation
that we shall be looking perhaps at DRM as an alternative method
of broadcasting and there is even now beginning to be discussion
of analogue switch-off. Those are going to add to the pressures
on the industry, presumably?
Ms Kerr: They are going to add
to the pressures in terms of working out what is the best migration
plan to digital, but we hope DRM will be part of the solution.
We are incredibly encouraged by the approach that Ofcom is taking
in its "future of radio" project, in looking at all
these issues and opening it up to discussion, so that we can be
part of building our own future and not simply have a future imposed
on us from a big building somewhere else.
Q117 Adam Price: The BBC is a minority
shareholder and a member of the Digital Radio Development Board.
Is it putting enough of its money into developing digital radio,
do you think?
Ms Kerr: I think probably we would
leave it to the DRDB to give its view on the support that individual
shareholders in it give, because none of us here represents the
DRDB. I will gladly ask their Chief Executive to drop you a note
about that.
Q118 Mr Evans: Just to ask a question
of Darren, do you know how many listeners you have got to Classic
FM on the internet?
Mr Henley: Yes, I do. People listening
digitally, at the moment around 13% of our audience is listening
through digital channels and we have around 100,000 listeners
on the internet at the moment.
Q119 Mr Evans: Do you know how many
of those are from abroad?
Mr Henley: They are all now from
the UK because we limit it to only the UK listening, so it is
listened to completely from the UK.
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