Examination of Witnesses (Questions 560-579)
MR ED
RICHARDS AND
MR TIM
SUTER
15 MAY 2007
Q560 Helen Southworth: Somebody has
got to start it.
Mr Richards: That is attractive.
That is a very attractive audience profile. It is slightly different,
for example, to Newsround or specific children's programming.
In some ways it is more attractive. Whether you have got a range
of broadcasters who believe it is their purpose to try and provide
that kind of mix of family, educational, informative, entertainment,
get that blend which brings people to watch but is also meeting
those public purposes, is again one of the central questions.
Q561 Helen Southworth: ITV obviously
do not think it matters too much?
Mr Richards: ITV will have to
comment for itself, but I think it is the right question in the
sense that we do want more than one broadcaster who feels it is
their mission and purpose to engage with those public purposes
and to try and find mass-reach programming which breaks through
while meeting those public purposes. No-one is interested in having
a model of public service broadcasting which is about things no-one
wants to watch. No-one is interested in that, or, if they are,
then we are not interested in that. You need to have that challenge
of meeting the public purposes but also reaching audiences. That
is at the heart of what public service broadcasting is about and
has been about at its best and I believe will be about in the
next decade as well, but that means you need organisations and
individuals who are making decisions, who feel that that is their
mission and that is what they wake up in the morning to do. That
is the best way of delivering it.
Mr Suter: One of the great promises
of broadcasting is that it can ride that balancing act of public
service broadcasting, it can ride the balancing act between providing
programmes that appeal to specific groups and providing programmes
that appeal to wider groups, of doing both the specialist and
the general, of appealing to the family audience but not ignoring
the specific interests of the child, and that is one of the great
balancing acts that broadcasters have to do and they have to keep
those things in tension with each other. Undoubtedly, there will
be an attraction in providing programmes that appeal to a large
mass family audience; that must not be at the expense of programmes
that are tailored to meet the child audience as well.
Q562 Helen Southworth: In terms of
the review, are you going to be looking specifically at the older
children and trying to establish this quality and engagement process
for older children as well? There seems to be a drift in the focus
on the up to sevens?
Mr Richards: What we have done,
excuse the term, but we have segmented the children's audience.
What you see is that there are three clear groups. There are nought
to six, seven to 12-year-olds and 13 up, and they have different
needs and they have different interests and there are different
challenges. So provision amongst nought to seven-year-olds, particularly
because you have CBeebies but you also have provision by Channel
five, is not bad. There are a lot of dedicated children's channels
as well. For six to 12, it is a much less rosy picture. The challenge
you get to when you are looking at 13-year-olds up, as many of
you will know, is that they have discovered the media by then.
Their media consumption habits are much more diverse, they are
online, they understand more than you do about operating the EPG,
they are interested in what we would regard as adult programming
as much as they are children's and it is a very different, much
more challenging environment. I think for those people you are
looking at ensuring that the kind of cross-generation programming
is there just as much as dedicated children's programming, but
also, by the time you get to that age (and I want to underscore
this), they are online nearly as much as they are on television,
and it is all sorts of different online content that they are
interested in, but they are not sitting there looking at BBC News
online and reading the headlines, they are looking for rich audio
and video as well as all sorts of other things. So, those two
worlds are coming together, and to appeal with public service
content to that generation we are going to have to ensure that
there is a public service presence of real significance both in
the broadcast domain and in the online domain.
Q563 Helen Southworth: Can I ask
you about your conviction that the ban on television advertising
for foods that are high in fat and sugar and salt is going to
cost over £20 million to the industry? Are you convinced
that that is a long-term issue? Are you convinced that this is
specific to the ban rather than the change over that is happening
in the change over with digital and what do you believe the impact
is going to need to be in terms of looking specifically at developing
children's television?
Mr Richards: We took a very, very
considered decision in relation to advertising restrictions and
we did not take it lightly. There were two things that we were
trying to balance. One was our concern as the communications regulator
for children's programming in particular, but also the knock-on
into adult programming, because a lot of children watch adult
programming as well, and we were concerned not to introduce measures
which essentially sounded the death knell of children's programming
in the UK. Twenty plus million pounds is a lot of money. A full
pre water-shed ban, we think, would have had an impact in excess
of £200 million, and clearly that is a different order of
magnitude. That is one of the reasons we came out where we did.
Equally, we had to recognise, and were asked to recognise, the
increasing concern about obesity and clearly it is rising. We
did the research, as you know, we identified a modest direct effect
and an unquantifiable indirect effect and on that basis we took
the view that there did need to be some restrictions placed within
television but always said—and you will forgive me, but
I take every opportunity to underline this—if you want to
tackle obesity, measures in television advertising will not do
it alone. It is not a silver bullet, and we have never pretended
it is, but we are happy to implement it on the basis that this
was one measure amongst what would need to be a series of measures
which would tackle the problem. How will we know it has succeeded,
will we know it is working and what will we do? We are planning
a review in 18 to 24 months' time. That review clearly will not
be able to determine whether obesity has fallen as a result of
these changes because there are too many other factors, but what
we can do though, and what we will do, is identify whether that
policy which we introduced was effective within the confines of
what it was trying to do. Have children been exposed to less junk
food advertising? Have food manufacturers sought to circumvent
the proposals by using brand advertising rather than specific
foods? All those sorts of questions. What impact did it have on
programming budget? We will try and strip that out from the effects
of digital switchover. We plan to do that in 18 months to two
years' time and that will give us a good idea about whether it
is being effective or not and, indeed, whether the impact has
been the one we expected it to be or not.
Q564 Helen Southworth: I think certainly
one of the things we will be looking at is whether the producers
of those foods have decided to lower the fat, sugar and salt contents
because that would keep us all happy.
Mr Richards: One of the reasons
we chose the approach we did was because we felt it had strong
incentives, it had strong incentives for food manufacturers who
want to advertise. They are a curious group actually because sometimes
they tell us that it is all a ridiculous policy because advertising
does not make any difference and then on another day they tell
us that it is outrageous we should be introducing it and they
should have the freedom to advertise and those two things do not
quite stack up to me. We will see whether the incentive properties
work but hopefully they will and we will see some reformulation
and then they will be free to advertise.
Q565 Chairman: Can I ask you very
quickly about your decision in relation to the Sky stake in ITV.
Six months ago Sky acquired a 17.9% stake which is clearly below
the level the Communications Act sets for a permissible stake
by another broadcaster. Nevertheless, you decided to tell the
Secretary of State that you thought there were public interest
issues in relation to the plurality of news provision. We have
heard from ITV, Michael Grade told us that he did not think there
were any concerns in relation to news provision. ITN said that
they might have had a "frisson of concern" originally
but now they have none at all. Sky have told us that they intend
"simply to be a supportive shareholder, but in a passive
way". Given all of those people have said there are no concerns
about news provision, why did you make a reference to the Secretary
of State?
Mr Richards: We were asked to
make a reference is the first reason; he sought our advice and
we were obliged to provide it and we did so. We too have had submissions
from various parties and I am just trying to recall whether they
will be made public. If they are, that will be very interesting
indeed.
Q566 Chairman: I have had the same
submissions, I think I know who they are.
Mr Richards: I hope they can be
made public. Forgive me, Chairman, but I need to be very careful
and limited in what I say because our report is with the Secretary
of State. All we have done is announce the absolute headline of
our recommendation. He will be publishing the report in full when
he is ready to do so, so I do not think it is right for me to
go into great detail. The core underlying reason for our taking
the view that we did was that the Act requires us and, indeed,
the OFT have expressed their own concerns about whether there
is material influence with that level of shareholding. The premise
is if there were to be material influence with an assumption that
there was. As soon as you make that assumption, we looked at the
evidence around news and we concluded that there was a concern
we wanted to register with the Secretary of State. I do not think
I should say anymore than that at this stage. It is a full report
and will be available as soon as it is published by the DTI.
Q567 Janet Anderson: We have been
told by many witnesses that there is already a substantial amount
of public service content available on new media and that barriers
to entry are low and there is little evidence of market failure.
If this is the case, why do you believe the Government needs to
intervene to establish a public service publisher?
Mr Richards: I think there are
two ways of answering that question. The first is where we began
with this, which is a position I would absolutely defend, is we
looked at the analogue model, which I described earlier, and we
described its decline, so that mix of public service broadcasting
which gave us the competition for quality, which I think has been
so valuable in this country, was clearly set on a path that would
make it very different and unsustainable in the way we have known
for the last 20/30 years. We then made a very simple observation
which is where are audiences going? We have talked a lot about
children, in particular older children today, and we said if we
want to re-imagine public service broadcasting for a digital Internet
age, if we want those public purposes and characteristics which
we described at the start of the session to be met in the digital
and Internet age, how would you go about doing it? The answer
seemed to us not necessarily to be, "Well, you do it through
analogue broadcasting", because the audiences are going to
be there but they are going to be in other places as well and
the other place they are going to be is on line. Your starting
point is to say, "If you want to re-imagine public service
content for that age you should embrace the on line world, the
broadband world, as well as conventional broadcasting". That
was a very simple starting point and we emerged from that saying,
"Why do we not consider creating an organisation or an institution",
which we named for the sake of anything better the PSP, but the
core insight was very straightforward. We are moving to that Internet/digital
age. Our public service content at the moment is all rooted in
broadcast provision, would it not be fantastic and exciting to
create something else which reflected the age we are moving into
which rooted an organisation or an entity in new media in the
broadband/on-line world and gave them the mission of meeting those
public purposes but starting in the new media on-line world to
complement the broadcast provision that we already had. We feel
it is not a fully worked out idea or proposal, and we would not
claim that it is, but it is that core insight that the digital
and Internet era is going to be different and viewers, listeners
and surfers are going to want something different. If we want
public service content and we want the competition for quality
in public service content, we want to meet those public purposes
in the digital age as we have in the analogue age, then that is
the kind of initiative, the kind of innovation, we need to think
about.
Q568 Janet Anderson: Do you not think
perhaps that kind of intervention could, in fact, inhibit innovation
and new entry rather than encourage it?
Mr Richards: You need to think
about that risk. Let me take the market failure argument for a
second in a different way. If we were starting with broadcasting
today and we said to ourselves, "Are we worried about inhibition
of the market? Are we worried about distortion of the market?
Are we clear about the market failure arguments?", I am pretty
convinced that we would not create the BBC, we would not create
a publicly owned Channel 4 and we would not put regulatory obligations
on ITV or Five, we would not choose to do that because we would
start by groping around for technical market failures to justify
the intervention and yet what is clear, and I think well recognised,
is that the mix of public provision and private provision has
given us the quality of broadcasting in this country that we have.
We get wonderful things from the commercial sector and we get
wonderful things from the public sector, from the public service
providers, and it is that rich mix, that complementarity, which
gives us the quality. I think in the on line/broadband world there
is a real danger of not recognising that core insight and not
translating it to the on line/broadband world because if that
is where audiences are going to mix broadcast with on line and
we do not re-invent and we do not re-imagine how we deliver public
service content for that world rather than analogue broadcasting,
I think we will be making a very serious strategic error.
Q569 Chairman: What you are suggesting
is essentially a sort of venture capital body to commission new
media content, is it not? Why does the Government need to be doing
that when so many other people are already doing it?
Mr Richards: One answer to that,
Chairman, as I say, is if you started from broadcasting today
you would pose the same question and you would come to a conclusion
which says, "Well, we really don't have to do anything".
I think the answer lies in why we do it in broadcasting and why
we want to continue to do it in broadcasting. These media are
coming together. The on line/broadband distribution model is going
to substitute for and complement television. People are watching
video and listening to audio over the Internet and using their
broadband connections now. Televisions will have broadband in
the back of them and in the future people will not know whether
what they are watching is by broadcast TV or whether it is coming
over a telecommunications fibre optic or copper line. They will
not know, they will be indifferent. The question is what sort
of public service content do we want in that world. In our view
the public service content in that world needs to embrace that
on line/broadband world as much as it does the traditional conventional
broadcasting model, and there are wonderful opportunities for
it. If you start by saying, "Meet these public purposes"
and you do not have to be confined to a half hour slot on television
because that is what convention tells you it should be or that
is what advertising breaks tell you it should be, if you start
with public purposes and you find the right people and then say,
"Meet those public purposes in a creative, innovative way
for the digital Internet age using the tools, instruments and
the interaction which is possible in that world", I think
it is fantastically exciting. I think it is fantastically exciting
in particular for those older children because that is where they
are. If we want public service content to be meaningful in that
future we have to be there with public service provision. I do
not believe the commercial market will be deleteriously affected
by that. Let me give you some evidence for it. I do not believe
it is deleteriously affected in the commercial market place in
aggregate. If you look at the spend in this country on subscription
and pay-TV despite the presence of the BBC, despite the presence
of Channel 4, you will see that it is as high in this country
as in any other country. That does not give you evidence of any
kind that there is crowding out of commercial provision. On the
contrary, it tells you that commercial provision can prosper alongside
public service provision and that is at the heart of what we need
to achieve for the next age as well as the one we have been in.
Q570 Chairman: When you originally
came up with this concept it was specifically designed to address
the problem, which essentially is at the core of our inquiry,
of how you maintain plurality on commercial broadcast, or at least
an alternative voice to the BBC, but what you are now proposing
is something completely different. It has evolved into a totally
different idea which is that you are going to be commissioning
content for new media in an area where there are already thousands
of providers. There is no difficulty in sustaining plurality in
new media.
Mr Richards: No, first I recognise
our thinking has evolved. This was a very radical idea when we
put it out, most people thought we were mad, but what has happened
since that, and it is literally only three years, is people have
said, "Crikey, Ofcom were on to something when they said
on-line and broadband are going to become a hugely important distribution
mechanism. They were on to something when they said that public
service broadcasting in the analogue model was in decline. They
were on to something when they said that audiences were going
to behave in a different way. Maybe it does not look so bizarre".
In those days people were not spending hundreds of millions of
pounds to buy YouTube, people were not spending hundreds of millions
of pounds to buy MySpace because those conventional media companies
have understood the significance and importance of this new media,
so our thinking has evolved as well. It was always rooted in the
idea that we would need to offer public service plurality and
content in the on line/broadband world as well as the conventional
analogue broadcasting world. Where does that plurality or how
does that plurality manifest itself in competition for the BBC?
One of the best things the BBC has done of recent years is get
into the on-line world successfully and providing some wonderful
service, of which there is not strong evidence that it is crowding
out commercial provision or provision elsewhere, maybe at the
margin, but by and large the commercial provision of on line content
looks pretty healthy despite major investment from the BBC. As
that on line provision becomes richer in audio and richer in particular
in video you are going to see the two media merge and you are
going to get into the kind of conversation we had earlier. Let
us talk about children again. Who will be making children's drama
in the future? Who will be making children's factual entertainment
in the future? Where will it be offered? Will that content, if
we can get it made, be offered just in a conventional linear television
channel? Of course not, it has to be offered on both, it has to
be a mix which allows audiences, in this case children, in particular
older children, to find it wherever they want to find it, to use
it, watch it, view it and interact with it when they want to,
when it is convenient to them, whether it is at the PC or on the
television. The idea of the PSP really is to drive our thinking
in that direction. It could easily be an organisation or an entity
which partners with a broadcaster to get the best of both worlds.
There are many different models or variants of it and, as I have
said, we would not claim to have the perfect solution. I think
the question for everybody here is the underlying insight in do
we believe public service content and a plurality of public service
content needs to be on line and broadband as well as conventionally
broadcast. If you accept that argument, then we are going to have
to have a mix of institutions, a mix of mechanisms for delivering
content which crosses platforms. Whether we call it a PSP or something
else, I do not care, the question I care about is having that
plural competition for quality in public service content across
platforms in the future.
Q571 Chairman: You have not yet expressed
any preference as to how this should be financed?
Mr Richards: There are only four
ways it can be financed. You could fund it out of general taxation,
you could hypothecate spectrum funds as a communications source
of money, you could have a very, very small industry levy or you
could use an enhanced licence fee. Those are the four ways; I
cannot see any other ways. We have expressed no preference for
any of those four. If you wanted to pursue something of this kind,
clearly you would have to go down one of those roads, but I do
not start there, I start with is this something of real value
which is something we should be really thinking hard about as
we think about what public service broadcasting or public service
content should be like in the digital age. Then when we have our
ambition and our vision for that era ask ourselves what we can
afford and what the source of that funding should be. You have
got to start with whether you think it is a good idea and what
kind of public service content and public service broadcasting
you would want in that era.
Q572 Chairman: When you came to see
us last April you said you were talking to the OFT about the Contract
Rights Renewal mechanism for ITV. You will be aware that ITV have
expressed extreme concern about the impact of that to us. Do you
think it does now need to be reviewed?
Mr Richards: We are still talking
with the OFT about this. Again, Chairman, if you do not mind,
it is an OFT decision and, therefore, I think in the spirit of
the very good co-operation we have with the OFT it is right and
proper for me to let them make a judgment about that in public
when they are ready to do so.
Q573 Chairman: You are not willing
to say whether or not Ofcom's view is that there should be a review?
Mr Richards: I am not willing
to do that in public because we are talking with the OFT in private
about it and I want to respect that private dialogue.
Q574 Philip Davies: I am sure, Chairman,
you will be proud that I did not continue my crusade against this
nanny state ban on junk food and advertising during this session.
You have just admitted that the public service publisher is only
a partial solution to the problems for the broadcasting market
and you gave some other options as to how they would pay for this.
Just to pick on one in particular, would you support the licence
fee being distributed more widely than the BBC in order to produce
some of the public service content?
Mr Richards: I do not think we
have a definitive view on that. When you look at the funding of
public service broadcasting going forward that is a question one
will have to look at and, as you will be aware, the Government
in its conclusion of the BBC licence fee settlement left that
possibility on the table open for, I think, four or five years'
time. One has to think very, very carefully about doing it and
there are pros and cons; some of the cons are important to recognise.
There is an argument that the licence fee is very closely associated
with the BBC and there is a unique one-to-one relationship between
the BBC and the licence fee payer and I think that is a relevant
factor one would have to take into consideration, it is a non-trivial
argument. The questions on the other side, of course, will be:
how important do you think plurality is? Are there other sources
of funding available? If not, how attractive would a division
of the licence fee be? I think there are arguments on both sides
of this and we have not reached a definitive view on that.
Q575 Philip Davies: You would be
open-minded about looking at that in the future?
Mr Richards: Given the changes
taking place in the system of public service broadcasting, which
we have described this morning and talked about, over the period
everyone should be open-minded about the model we should emerge
with for the post-switchover period. I would not want to go any
further than that. I think it is important to be open-minded about
that and particularly in our position.
Q576 Philip Davies: The report you
commissioned from LEK into Channel 4's finances found that Channel
4 is likely to face financial difficulties and become loss-making
beyond 2010. Other broadcasters disagree wholeheartedly with that
view. ITV said, "Channel 4 remains a broadcaster in rude
good health", and Sky said that the, "claim by Channel
4 that it faces commercial difficulties in providing public service
broadcasting is neither plausible at present nor likely to become
so in the future", so why are they wrong and LEK right?
Mr Richards: Let us draw a distinction
between the two. We are in receipt of submissions from Sky, ITV
and others and we are considering them at the moment. Sky and
ITV clearly have a particular corporate interest. The reason we
asked LEK for a review and a report was because as far as this
is concerned they have no corporate interest. We asked them for
an independent view and they have given us an independent view.
I think it is important to start at that point. There are a whole
variety of reasons as to why people might take a different view.
There are a number of variables, the level of advertising that
is going into television, the cost of programming, and so on and
so forth. One of the things we will be asking ourselves as we
consider those submissions is do we know enough at the moment?
When will we know enough to make a clear judgment? You will also
be aware—I am sure ITV and Sky have made those opinions
clear to you—that Channel 4 think the LEK report is far
too optimistic and were pretty unhappy about it. There are two
sides to this coin and our responsibility is to seek independent
advice and then make an independent judgment. In this instance
it will be a judgment which manifests itself in the form of a
recommendation because the real decisions in this area are, of
course, for government rather than for us.
Q577 Philip Davies: From what you
have said, do you accept that Channel 4 will need further funding
in the future?
Mr Richards: That is what we are
considering at the moment; we have reached no conclusion about
that. The LEK report and the response to the consultation to the
report are what we are looking at at the moment, so we have reached
no conclusion of any kind on that at the moment.
Q578 Philip Davies: When will you
be coming to a conclusion?
Mr Richards: We will publish something
responding to the LEK work and the views of others which we have
had off the back of it before the summer and we will let our position
be clear at that point.
Q579 Chairman: Can I ask you on two
slightly different issues but both of which have considerable
public interest. The first is Celebrity Big Brother.
When are you going to publish the findings of your investigation
into the complaints?
Mr Suter: Our process is continuing.
We are now actively considering the final stages of that process
and I hope to do so shortly. It is important that broadcasters
have the opportunity to present to us the full facts as they would
have us know them and that we have an opportunity to consider
those carefully before coming out with our judgment.
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