Examination of Witnesses (Questions 220-239)
MR MICHAEL
GRADE AND
MR JOHN
CRESSWELL
13 MARCH 2007
Q220 Chairman: So it is completely
untrue?
Mr Grade: Yes.
Q221 Chairman: Can I move on to the
more general question which is the main subject of this inquiry.
You will have heard what Andy Duncan was saying earlier. In your
evidence you have essentially suggested that, despite the changes
and the fragmentation of audiences and the move into the digital
age, nonetheless, ITV can go on providing public service programming
under the current funding structure. How do you, therefore, respond
to what Andy Duncan was saying, not just specifically about Channel
4's funding gap but about the general problem that it is going
to affect all commercial broadcasters?
Mr Grade: The world is changing
and becoming more competitive. My concern in the discussion of
the public service broadcasting deficit is fundamentally about
news and originated productions. How audiences' tastes develop
is another issue. I think that if we can get through digital switchover
and get through the foreseeable next ten years with high levels
of original UK production for UK audiences, as opposed to rerunning
cartoons and archive programming as mainstream, but, more importantly,
provided the British public has free-to-air, a plurality supply
of international, national and regional news and choices, impartial,
independent and properly funded, that is as much as we can hope
for; and if it requires some funding mechanism to ensure that
is provided, then I think, in terms of public policy, that is
as much as we can expect, and I think that would be a very good
result and that would be in the public's interest. I am deeply
concerned about the idea of pots of money being made available
for all kinds of programming. Programme makers are ingenious people
and will find ways of accessing cheap money in ways which were
not intended. We have seen that in some of the abuses of the film
funding measures that the Government has introduced. There has
been abuse, the envelope has been pushed, and so on. So, my concern
is about news more than anything. One of the nightmares when I
was Chairman of the BBC was that the BBC was the last national
broadcaster standing providing national, international, regional
news on any real scale, and that would be a nightmare position
for the BBC and, in terms of public policy, I think that would
not be in the public interest. So, my concern is about news provision.
Q222 Chairman: We are going to come
on to specific aspects of news, regional programming and children
shortly, but before I leave the general position of the funding
of ITV, you are relatively optimistic about the future. How important
to you is it that CRR is either dispensed with or, at least, fundamentally
changed?
Mr Grade: A remedy such as CRR,
which was the condition of the approval of the merger of Carlton
and Granada Groups, normally stay in place for about three years,
and it was part of the agreement at the time that there could
not be a review for three years. I think the Board at the time
took that to mean that there would be a review in three years.
We have no sign of the review yet. It is very damaging. It is
damaging for the whole sector. It is damaging for us, but it is
damaging for the whole sector. It has a severely deflationary
effect on the cost of ITV's airtime and all commercial broadcasters
price directly or indirectly off the ITV price, so there is a
lot of money leaking out of the whole of the commercial sector
as a result of CRR, and, of course, it has the effect of encouraging
ITV to play safe and stay with programmes that have been on the
air too long because they are safe, rather than innovating and
taking chances and risks with new talent, and so on. It is time
for a review, and I think privately most people agree that is
the case.
Q223 Chairman: But you and I were
both addressing ISBA last week, and you rightly make the pitch
to the advertisers that if they want to reach an audience of tens
of millions in an evening, there is only one way they can do that,
which is by placing an ad on ITV. Given that ITV still have that
power in the market, does there not still need to be some mechanism
to prevent you exploiting it?
Mr Grade: Absolutely, Chairman.
ITV has a strong position and it is not in the interests of industry
in this country that there is rampant inflation in ITV's airtime.
What we want is a fair price for our airtime and the flexibility
to take risks in our schedule that may not pay off in year one
but may pay off in years two or three, which will improve the
environment for the advertisers, and, most importantly, if you
reduce the selling of airtime to a commodity, you end up with
a programme set of commodity ultimately, but I do accept totally
that there should be a mechanism in place in the short term that
will give the advertisers total confidence and protection, which
is what CRR was designed to do. It is having horrible side-effect
consequences, but they are entitled to the protection that ITV
will behave properly and fairly in the sale of its advertising
airtime.
Q224 Adam Price: You mentioned regional
news services as an important part of your public service broadcasting.
In your submission you say, and I am sure it is right, that your
viewers value your regional news services. What evidence have
you got for that? Does it extend to regional non-news programming
as well?
Mr Grade: ITV is a product of
its history and over 50 years, and as soon as you get out of London
you feel this—I am getting around all the ITV regions; I
have got about three or four still to go—that connection
between the ITV audience and its local ITV station, in Border
we are Border first and ITV second, and in Anglia we are Anglia
first and ITV second, and that is a huge part of the brand value
of ITV and we must do nothing to dilute that. There is a cost
attaching to that, but that connection is on a nightly basis through
our regional news, which remains very popular and which we invest
heavily in, and we have just invested a great deal in digitising
pretty well all the new rooms. I think there is one still to go.
I think Border is the last, the first to be switched over digitally
and the last newsroom to become digital in the ITV system, but
that is happening, and that connection is important. So far as
non news and local programme news is concerned, as a result of
my tour I am instigating a system inside ITV where programmes
that have been produced in a region for the region get systematically
offered to the networks—ITV1, two, three, four—to
have a possible longer life than simply one showing in their local
region. I think that may encourage production, I think it may
encourage talent and, I think, will connect us, in a way, to our
regions.
Q225 Adam Price: If viewers value
it so clearly, as you say, and if it has, more than anything else,
defined the ITV bracket both in terms of regionalism in England
and across the national franchises in Wales, Scotland and Northern
Ireland, why are you prepared to consider relinquishing that if
the economic conditions force it? Are you not giving up your unique
defining characteristic in the market place?
Mr Grade: We have to decide as
a commercial broadcaster what the level of investment is that
we can afford and what return we get for that investment—some
of it is intangible in terms of the brand the value, some of it
is in terms of regional advertising. Many regional advertisers
start with a few spots on Yorkshire Television and end up as national
advertisers. DFS, for example, is our biggest single brand advertiser—Lord
Kirkham started with a couple of slots on Yorkshire Television;
he is now our biggest single brand advertiser—and that ability
of ITV at a regional level to help people to build their businesses
and then become national advertisers is good for business, but
at the end of the day we have to do our sums and make sure that
we are getting a proper return. At the moment it just about washes
its face, but if we carry on with the decline that we are presently
enduring, some of it we can arrest ourselves by better programming,
I accept that, but the CRR mechanism, and so on, makes it very
difficult. That is something we would have to look at as a commercial
broadcaster, but I would like this Committee to be under no misconception.
That regional connection for ITV in a post analogue world is one
of the great unique selling propositions of ITV. At a time when
brands become national, global and so on, that connection with
community, that connection that there is a national broadcaster,
or that there are two (the BBC, which is moving more out of London,
and ITV) who understand that where we live is different from London
is vital and an asset to us. The question is how much we can afford
to invest in it.
Q226 Chairman: In response to your
own request, Ofcom cut the non-news regional programming obligation
to, I think, half an hour a week after switchover. I thought you
put up quite a persuasive case on the basis that the cost to you
of making regional programming six or seven times what it is if
it is aired nationally—
Mr Grade: There is also the opportunity
cost of that airtime and the minutes that you can sell around
the programme. If a regional programme is doing better that the
network schedule, then I am all for it.
Q227 Chairman: Accepting that as
well therefore, how are you going to get round these economics?
It is fantastically expensive for you at a time when your finances
are under pressure?
Mr Grade: I would have to say
that I do not see a great future for regional production. Where
I think there will be an increase, which I think is exciting,
is through broadband local, either user-generated content or certainly
ITV Local, where we are able to provide services at a very specific
local level through broadband. I think that is where the expansion
is going to come, and it will be much welcomed.
Q228 Chairman: But you said regional
programming was the USP of ITV?
Mr Grade: Regional news is the
core.
Q229 Chairman: So you see it reducing
down to just news programming?
Mr Grade: I would suspect so,
in time, yes.
Q230 Chairman: But despite the cost
of regional news programming, you still see that being maintained
at least at its present level?
Mr Grade: So long as we can, absolutely,
and I think it is imperative from a public service standpoint
that the BBC does not have the only voice regionally. I think
the way we draw our map, which is as a result of transmitters
and so on, we identify much more precisely at a regional level
with what we call the sub ops—in the region of 25 sub ops—I
think people feel that we understand better their location and
where they live, and the BBC is hamstrung a bit by the transmitter
configuration. For example, in the BBC, I think, Border and Tyne
Tees is one area of the BBC which is not terribly helpful.
Q231 Helen Southworth: Could I ask
you about user-generated content, particularly focusing on regional
news, broadband, and the very rapid change we are seeing with
individuals photographing and submitting content. What are you
actually going to do to make sure that you have good editorial
control and that you are not chasing after the issue?
Mr Grade: I would have total confidence
in ITN, as one of the most experienced news organisations in the
world, to have systems and alertness to the issues raised by user-generated
content, and I would be very surprised if ITN slipped up in that
area in any way, shape or form in terms of news.
Q232 Helen Southworth: You are going
to give some guidance on that issue to make sure that that is
the case?
Mr Grade: There are very strict
programme codes and so on. The BBC got duped some years ago by
a cod website on Bhopal, Union Carbide. There was an imitation
website. That was a lesson for everybody that you do not believe
everything that you read on the Web, but in terms of ITN's experience,
wisdom and sensitivity to these issues, I think it is second to
none.
Q233 Helen Southworth: You are talking
about as soon as you get out of London you can feel the connection
with people. Are you going to be seizing the opportunity of Media
City? The BBC is feeling the difference?
Mr Grade: We are examining our
options in the North West. It seems to be that my life has been
a preparation for considering moving resources around in the North
West and being caught in a tug of love between Salford and Manchester.
I am quite enjoying the experience, to be honest. We are looking
at our options. We have a huge site in Manchester, which is in
need of some repair, and so on, and we are looking at our options.
We have made no decision yet.
Q234 Helen Southworth: We have got
an awful lot of very creative people in the region looking with
enthusiasm to see the maintaining investment and developing it?
Mr Grade: Indeed, and at the heart
of that is Coronation Street itself and the back lot.
Q235 Helen Southworth: Can I ask
you about children's programming? In 2006 Ofcom rejected ITV's
request to reduce the quota on children's programmes from eight
hours to two hours a week. You are allowed to average the hours
over a year, and since January 2007 you have been broadcasting
only two hours of children's programmes each week and showing
repeats of Inspector Morse and Midsummer Murders
instead. Pact have been telling us that they are not expecting
you to be producing or commissioning children's content in five
years despite the amazing quality of children's programming and
the real importance it is to children's development.
Mr Grade: Perhaps I will ask John
to answer this in a little bit of detail, but before that I would
just say that, as a result of the digital expansion, one of the
areas of choice that has expanded dramatically is what is on offer
to children. Believe it or not, I have an eight-year-old son who
will flick through Nick Jr., Discovery Kids, CBeebies, CITV, the
huge massive choice through the digital platforms that we have
at home. This is an amazing growth area over the last few years.
Perhaps I will ask John to address this specifically.
Q236 Chairman: Not of British-made
content. The majority of it, I believe, is either BBC—
Mr Grade: A lot of it is. A lot
of it is imported. A lot of it is very educational. If you watch
Nick Jr or Discovery Kids, there are some wonderfully
educational programmes, science programmes—my eight-year-old
is riveted—history programmes, and so on, tremendous opportunities.
Q237 Helen Southworth: But should
there be a specific requirement on investment in original content?
Mr Grade: There is. Perhaps I
can ask John to—
Mr Cresswell: I think when we
have answered and spoken about this before we have highlighted
that ITV has not backed out of kids' programmes. We launched the
CITV channel that, I think, is a year old this week. It is available
to 90% of kids right across the country. As far as the relationship
with Ofcom, we discuss these things with the regulator and consult
with them as to the meaningful amount of children's programmes
that we will make, and I think across ITV and Channel 3 as whole
this year, if you include GMTV as being part of Channel 3, we
will broadcast more children's hours than BBC One and BBC Two
are committed to. So I still think we are going to see a meaningful
amount of programming on ITV1 this year, and 50% of that, I think,
will be originated programming.
Q238 Helen Southworth: Commissioned
in the UK?
Mr Cresswell: It is originated
programming, which means it is commissioned in the UK, yes.
Q239 Chairman: The EU, I think.
Mr Cresswell: The EU technically,
but generally it comes out of the UK. We are not into Romania
yet!
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