Examination of Witnesses (Questions 600-619)
SATELLITE AND
CABLE BROADCASTERS'
GROUP AND
MR IRWIN
STELZER
12 JUNE 2007
Q600 Chairman: Geoff, can I ask you,
you in your submission have pointed out that the satellite and
cable channels are not, according to the definition, public service
broadcasters but, nevertheless, provide a lot of public service
content, according to the kind of definitions we have been discussing.
Have you ever attempted to quantify that, to actually try and
measure the amount of public service content that is provided
by the market?
Mr Metzger: We have commissioned
David Graham Associates, who are the Rolls Royce of research in
the UK, to look at the amounts of public service broadcasting
we provide. In fact, even without looking at the research, because
there are so many digital channels and because the BBC, Channel
4 and ITV all have digital channels now, it goes without saying
we are the largest distributor of public service broadcasting
in this country; that is to say, that which is paid for either
by free spectrum or the licence fee. If I recall, we provide something
like 79% of the arts programming—I will get back to you
on the figures on that; a similar figure for children's programming;
a great deal of the news; and quite a high proportion of the documentaries.
I think the only category where we do not provide more public
service broadcasting is current affairs. In terms of a pound figure,
we spend about £150 million a year in, shall we say, the
British creative industry, the production industry. It is quite
a substantial number.
Q601 Chairman: The criticism that
has been made to us is that an awful lot of the content is actually
imported. Considering the number of channels you represent, the
amount that is being invested in UK content is relatively small,
is it not?
Mr Metzger: Surely by comparison
with the 3.5 billion that is spent on the BBC, yes, I would say
that is true.
Q602 Paul Farrelly: I have got a
section here entitled, "Has Ofcom got it right?" It
rehearses Ofcom's evidence that there should be more intervention
to encourage public service media content. Chairman, I am just
going to go off-script if I might. Should Ofcom exist?
Mr Stelzer: I gave a talk there
at their request and I opened by asking them what they do? It
was unclear. There are a lot of them, but I do think it should
exist. Media are different. Media are different from the steel
industry when you are talking about a democratic society. I think
in Britain, where you do not have a First Amendment, because society
has decided that it wants some control over content (which is
a decision that, as an American, I would not take but I understand
and respect) where you have the feeling that the ordinary application
of competition criteria to mergers is not adequate when you are
dealing with the media, that there is something out there called
plurality, which I cannot define but which people think is a good
thing to have in the media, yes, I think it should exist. However,
it runs a very big danger of what we in economics call "regulatory
capture"; that is, there is this free interchange between
the regulated and the regulator in terms of personnel. A lot of
the people at Ofcom come out of the BBC; that does not mean they
are corrupt, it just means they have a world view that is formed
while working for the people they are regulating. Also regulators
generally have the notion that they are smarter than markets.
It is very hard for them to restrain their reaction to this revelation
when it comes to them. There are very few regulators that can
do that. So when they stray into things like proposing this new
BBC I think they go beyond the line. I do think they have a regulatory
function, especially given the predilections that seem to exist
in British society.
Q603 Paul Farrelly: What do you think
then if there is a case for a regulator to exist: what should
be the limits; what should be the lines?
Mr Stelzer: You have this convoluted
structure of control at the BBC, so it is very hard to figure
out who fits in where. I think partly the convoluted structure
is erected to make certain that nobody can figure out how to control
this thing. I do think they should have a review function of mergers,
in addition to the competition authorities. I did not used to
think so, but the more I see the sensitivity of Britain to the
structure of its media industries, the more I have come to think
that that is kind of a useful function. A sector regulator in
addition to the general competition regulators—I believe,
given the predilections of British society, they have a role in
content review.
Q604 Paul Farrelly: Can you say what
you mean by "the predilections of British society"?
Mr Stelzer: Because we have a
First Amendment in America, we have the notion that almost anything
goes, at least on cable and satellite. We would not legally be
able to do some of the content review that you do here.
Q605 Mr Sanders: They do not have
a First Amendment in many European countries and they do not have
any predilections to wanting to—-
Mr Stelzer: All I know is when
I talk about content regulation in America—the FCC. You
want to talk about content regulation—Ofcom. Ofcom feels
much more justified and much safer in setting watersheds and doing
things like that that American regulators would not be comfortable
doing. I do not think I should bring those values here. There
are some I think I should be—market values and things like
that—but those kinds of social values I think should be
particular to Britain.
Q606 Mr Sanders: But there are all
sorts of things you cannot do on American television, words that
can be used that are quite freely used on British television?
Mr Stelzer: We are priggish about
different things. That is, we are more priggish about sex and
less priggish about violence, for example. All I am trying to
say is there are differences, and I think Ofcom has a role in
expressing—You are trying to push me in my libertarian direction
and that is a pretty easy thing to do, I might add. You can get
me to change my mind with one more question! I do think that Ofcom
has a legitimate role, as I understand what you people want out
of your media, in saying something about content. Am I comfortable
with that? No, but I understand it. As I say, I think they have
something to say about competition. I think there is a kind of
useful thinking about media that Ofcom does; this kind of groping
for what we mean by "market failure", and that sort
of thing. I do not think they should be straying into suggesting
whole new subsidised structures for what you call public service;
I think that is going too far. Regulators are restless; they tend
to expand
Q607 Paul Farrelly: Geoff could I
ask the same question in a different way. Has this Parliament
given Ofcom too many powers? Has it created a monster?
Mr Metzger: I do not know. I think
there are some powers it does not have that I would like to see
it have. I do not see why it should not police the BBC. The BBC
sets its own rules and the new Trust has been created in order
to make sure they obey their own rules—the rules on competition,
fair trading and things like that. When the Communications Act
came through the Lords there was in fact a clause introduced which
said that Ofcom should actually be allowed to police the BBC in
this regard too if there was a conflict of interest and, hence,
the Trust was created. I am not sure if it has solved the problem
or not, quite honestly. I agree generally—I think there
is a role for Ofcom: I think review of economic matters; certainly
content matters; enforcing the PSB obligations that the commercial
broadcasters have, those sorts of things. I agree with Irwin though,
I do not think they should be in the business of setting up other
public service broadcasting functions, as it were, things like
the PSP. Someone said to me the other day the PSP is a cure with
no known disease and I think that is sort of true actually. At
least if you read the Ofcom documents there has been no analysis
to identify any sort of gap in public service broadcasting. Failing
that, the SCBG is not in favour of the public service publisher.
Q608 Paul Farrelly: Sky One is an
absolutely fantastic channel: 24, The Simpsons.
In fact if my wife was not an architect and a style fascist I
should have a satellite dish outside my house to get it. I would
have it on cable if she did not want to ration what the kids had
in terms of programmes. Do you both think Sky One could be so
good if it did not have to keep up with the neighbours, like the
BBC which have a public service broadcasting influence?
Mr Stelzer: You introduced me
as being from the Hudson Institute, which is true, but the record
ought to show that some years ago, I think five or six, I was
a consultant to Sky and am currently a consultant to News Corporation
and News International. When I answer questions about Sky I want
that clear. The answer is, I do not know because I do not watch
Sky One. I am a sports fan and I watch sports all the time and
news all the time. I am a news freak and a sports fan. Would Sky
One be less good if it did not have competition from the BBC?
Yes, competition is good, so I suspect that is true, but it has
lots of competition from commercial broadcasters. Whether the
diminution by one of its competitors would adversely affect it
I do not really know.
Mr Metzger: I think what is interesting
about Sky One and the BBC is this: actually Sky One set itself
apart. We do have a lot of American television and much of it
is on Sky One, and much of it is very good as you say. In fact
there is a lot of good American television here; it is one of
the things that the Americans do well. I think what is really
interesting is that the BBC has come to a Sky One position by
and large. They have just bid for a programme called Heroes
and they outbid Sky One for it, and they paid a staggering sum
of money per episode for it; I am not sure what it was.
Q609 Chairman: Did you say the BBC?
Mr Metzger: Yes.
Q610 Chairman: This is Heroes
that is currently out on the Sci-Fi channel?
Mr Metzger: Exactly
Q611 Chairman: It is very good. I
have been watching it.
Mr Metzger: The second season
has been taken by the BBC, and I think they have spent more than
half a million an episode, quite a bit of money.
Q612 Chairman: So the BBC is spending
public money to purchase an American show that has already been
screened in the UK on the Sci-Fi channel?
Mr Metzger: This is the second
season, so you will be able to watch it on the BBC. My point is
this: the BBC is derivative in that way. In a world of spectrum
scarcity there was a good argument for buying that kind of content.
It was a public service. In a world where the market provides
lots and lots of it, I think that sort of thing should be considered
very carefully.
Q613 Paul Farrelly: One of the real
concerns which has been expressed in the debate about children's
TV is that the more channels you have the fewer the audience each
channel has and, therefore, the less able each channel is to commission
its own original content; and so you get a proliferation of, for
example, Australian stuff where they have a great industry in
churning this out. Do you think there is a role for a domestic
channel like the BBC that sets out to say, "We will commission
original content and use the licence fee to do it and do the country
a service", or is that too French a view, do you think?
Mr Stelzer: We are talking now
exclusively about children's television?
Q614 Paul Farrelly: Generally about
competition and proliferation and the lowest common denominator.
Is there a role for a particular type of regulation, or a particular
service to stand out against the rest and say, "We will do
this for our country"?
Mr Stelzer: We are starting here
with a leaky fountain pen and we are trying to find a pair of
rubber gloves that will enable us to use this leaky fountain pen.
You have got the BBC sitting with £3 billion plus and the
question is: if you are going to have that, what is the best way
to use it? That ducks the question of whether you should really
get a new fountain pen. Let us assume you have got this leaky
fountain pen and we are going to find rubber gloves, and the rubber
gloves would be competitive bidding for these resources so that
you could get the best offers on how to use them. Whether the
person who himself is producing stuff is the best judge of what
competitors can do with the same money I leave to you. I think
the self-evident answer is, no. Sure, given this, you want as
much competition within that framework as possible, since you
have locked yourself in now for, what, five or seven years, to
not changing the framework.
Mr Metzger: If there was a gap
in the market, yes, there would be every justification for that
sort of thing. When CBBeebies and BBC Kids launched there was
an enormous furore by the commercial channels and it hurt their
business, there is no doubt about it. I agree with Irwin—competition
is good; it incentivises us to do things to innovate, to give
good value for money. We are also probably the best distributors
of that content service bid, because kids have gravitated towards
the Internet; they have gravitated, slowly, towards digital channels;
we are specialists in these things. I do not agree with the argument
that fragmentation is actually hurting public service broadcasting.
I think it is actually making it easier to get to the groups of
people that you want to. So if you want to foster democratic values,
for instance, or multicultural values, or to give good communication
about sexually transmitted diseases the best place to do it these
days is in the fragmented digital world. As we know, the share
of the publishers as broadcasters is coming down and down and
down. You cannot really make people watch. If they want to, they
want to.
Q615 Paul Farrelly: Just one final
question, Chairman, if you will indulge me. When I first came
into Parliament in 2001 I came from a newspaper and I spent my
first few months on this horrible thing called a Joint Committee
for Commons and Lords and met some fantastic people when we were
looking at whether we should set up Ofcom and what the Communications
Act should say. To a man and woman everyone there, including the
late and great Duke Hussey, wanted to resist the "Foxisation"
of British news. Do you think it would add to anything in this
country if we had a news channel that should say the day after
a General Election "It was Sky what won it; or the BBC what
won it"?
Mr Stelzer: That is an interesting
question. I think it is not a question of saying it. The BBC does
not have to say, "It's the BBC what won it", because
the BBC won it, the BBC sets the agenda that people talk about.
The notion that there is this great impartial thing sitting out
there that just informs the public is bogus You cannot be a thinking
person and be impartial on the kinds of things that the BBC reports
on. That is not possible. That is why I think you should abandon
this crazy idea that there are some wonderful people sitting out
there completely impartial, reporting on social events and politics.
If you are an American watching the BBC you really just want to
go home; which may be what they want you to do. I think you should
have conflicting biases on television. What worries some people
about Fox is that it is an offset to a uniformly liberal reporting
of news in America. The notion that somehow Fox is biased but
those are not is wrong. Everyone is biased. I would like to see
competing biases. For instance, television programmes in America
always invite think tank experts to comment on Iran, Iraq, teenage
pregnancy and so on; and if you take CNN which is the liberal
counterpart, 85% of the people they invite are from Left leaning
think-tanks; at Fox it is 50:50. I am not so sure that the "Foxisation"
that you worry about is not simply a further extension of antipathy
by some to Rupert Murdoch that exists in this country. That is
a handier thing for a politician than to attack the Sun,
because the Sun might do something back to you in return.
I do not worry too much. I am sitting there with 200 channels.
What do I care if a channel is biased? Let it be biased; I will
not watch it. When you are looking for impartiality you are not
looking for a black cat in a dark room; you are in a dark empty
room; there is no black cat in it and you are not going to find
it. What you should do is figure out how you can have competing
biases on television and do not worry if some guy is biased in
this direction and some guy is biased in that direction. People
are pretty smart. They know which newspaper suits them. They would
know which news programme suits them. If it is the BBC then that
is fine. Sky News I think is a very good channel. I think BBC24
is a very good channel; I watch them depending upon what they
are covering at the moment. I would not worry too much about that
issue.
Paul Farrelly: I come from a background
where I was working for Reuters and—
Chairman: I think we are not just off-piste,
we are off-mountain!
Q616 Paul Farrelly: This is my final
question. At Reuters we still call the IRA "guerrillas".
I wanted to call them "murdering terrorists"; so I feel
the BBC is quite a liberation. It is quite a good thing that most
governments complain about the BBC, that it is against them. Geoff,
do you think that Sky News, which is fantastic, would be as good
if it did not feel it should follow the public service ethos that
we have regulated?
Mr Metzger: Before I answer that,
just a couple of things. I think everybody is biased. I agree
with Irwin there. The thought of the BBC does not make me want
to run back to the United States at all. I think it is a very
good news service; I think it is among the best; but I do agree
with Irwin that we should have opinions. I think all news services
should be entitled to have opinions as long as the laws on accuracy
are well enforced. Newspapers have opinions. They get to say what
they want to, and they are very large deliverers of messages.
I do not see any problem with that. I am not against Fox and I
am not against CNN, but they are entitled to have their opinions.
I think that is a good thing.
Mr Stelzer: Sky News has the appealing
characteristic of what you would think of as lack of bias because
that was a good business decision to get people to watch it. The
notion that it is better because it was put on in competition
with the BBC I do not think is quite right, since the BBC did
not have any such service. Sky innovated and created a service
which the BBC copied. The decision to have it in the Fox manner,
other than because of the laws, was a reading of what the public
wanted to see, and apparently a quite successful reading.
Q617 Alan Keen: I am sorry to stick
slightly on the same subject initially but Irwin has talked about
our predilection and I think there is a difference between the
US, the BBC and Sky News here. I think the public can see the
difference here; they want to trust the facts that are put to
them, and then they are quite happy. When people are making the
comments about what the Prime Minister has just said, they know
then that is an opinion. They know the difference between what
is news and what is an opinion. They do not want news presented
in a slanted way; they want to know that it is fact. I have asked
this question over a number of years on this Committee and times
have changed and my views have changed: we have seen the BBC being
restricted in the amount of money it was allowed to charge the
public by government, because the Government thought they were
asking for too much and the government gets the blame from the
electorate. The BBC has not got a free hand to raise whatever
money it wants to, which is different from what private companies
have said in the past, so there is good proof of it. Also proof
was given recently when the BBC have lost more sport to Sky; so
it shows that the BBC cannot dominate the markets as people accused
them of. Would you agree with me, or discuss the fact that we
have now reached the point with so much choice that we should
just say, "The BBC, let it raise as much money as it can,
that the government will allow it raise, and then operate quite
freely within that, but with certain public service broadcast
inclusion in that"? What about that?
Mr Metzger: When you say, "let
it raise as much money as it can", that the public decides
how much money it wants to give to the BBC?
Q618 Alan Keen: No, I am saying that
the government decides how much money; the government knows it
would get thrown out of power if it doubled the BBC licence fee.
Mr Metzger: Indirectly through
the democratic process?
Q619 Alan Keen: Yes, it is part of
the democratic process is what I am saying.
Mr Stelzer: I have trouble with
the notion that the last settlement was somehow constraining.
You have an organisation that got a gigantic increase in the amount
of money it is getting, with the people paying it having nothing
to say about how much they are going to pay. In an industry where
the technology is changing at a rate that is mind-numbing, it
gets a guaranteed essentially inflation-proof increase for, what,
five years or seven years (I forget which). To worry that somehow
that settlement constrains this organisation—there are other
things to worry about in the world and that is not one of them.
The notion that you should get concerned because the BBC has lost
sporting events, for instance, to Sky; Sky has lost sporting events
to this new Irish consortium; it seems to me that the money from
this bidding process has enlivened British sport and has enormously
increased the range of sport that people can see on television.
If you look at the supply curve of sport since Sky, satellite
and cable came into being, it has enormously increased. That has
got to be a plus from viewers' point of view. If, on the other
hand, you are saying that what you would like to do is allow the
BBC to raise as much money as it can by, say, becoming a subscription
service—I did not think you meant that but it is something
you might want to think about—that would really free it
to raise as much money as it could get its hands on, by getting
people to watch it. I do not think that is what you are after.
Number one, I would not worry about the past settlement constraining
them. Everybody who gets money from the government says it is
not enough. You are going to hear that in the energy sector very
soon. I think you can relax about that. If they lose some sporting
events—people will watch the sporting events, and there
is a lot more sport. I remember when the BBC Wimbledon had and
would show you an occasional match; you can watch all of Wimbledon
if you choose to on a variety of stations.
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