Examination of Witnesses (Questions 620-639)
SATELLITE AND
CABLE BROADCASTERS'
GROUP AND
MR IRWIN
STELZER
12 JUNE 2007
Q620 Alan Keen: I am completely relaxed
about the BBC losing sport. I am a great fan of Sky Sport. I am
Chairman of the All Party Football Group and I am a great fan
of Sky Sport. It has done a massive amount for football. It is
our money and we are willing to pay, but we are happy to pay it
because Sky make such a good job of it. What I am saying is should
the BBC not be freer? Should the private sector not complain too
much when the BBC innovates, like BBC online; they have done a
great job on that. It is the duty of the private sector to try
and restrict the BBC and government from giving them a free hand.
Do you not think the whole thing should be freed up much more;
and we should just recognise the BBC is an entity restricted by
this government getting the blame if the fee goes too high? It
is just a different sort of ownership. What about that?
Mr Stelzer: You have a problem
when you say, should they be restricted from expanding here and
there? This is not a commercial enterprise that has won its spurs
by satisfying consumer demand. It has won its spurs by filling
a politically defined niche in society. Every expansion at the
BBC, every announcement of an intention to expand stifles innovation
in the private sector. IBM for instance, for a long time when
it had monopoly power, used to scare away competitors by saying,
"Two years from now we're going to have a better something",
and so everybody would go home. Microsoft does that all the time
and scares away venture capitalists from funding competitors.
While you are quite right, you do not want to straitjacket this
organisation that you have decided is necessary. I think you should
consider that when it expands into other areas this is not costless
to you. This is freezing out someone else who might expand into
those areas. Just as Sky has brought innovation in sport that
is valuable—I think when you do a 24 hour news channel like
Sky did, and then a "free" competitor comes along, that
is a warning to somebody that the next time you have a great idea
you had better think again; not just, is my idea any good; but
is somebody going to come along with huge resources and offer
it to the public at no additional charge to the public? That is
a cost you pay for BBC expansion. As long as you recognise that,
and balance that in the consideration of where you want to let
the BBC roam that is fine, but do not ignore it. Geoff can speak
more on that than I can because it is his people who get scared
away.
Mr Metzger: I agree entirely.
I think you mentioned the online business the BBC has gone into.
We have all gone into the online business. We all have websites.
That is an extremely important part of the next stage of development
for the media in the private sector. You have to be very careful
about the impact on the market and what that does to stifle competition;
what that does to stifle plurality. We are certainly in favour
of plurality, but there is a real disincentive to invest if we
think that the 600lb gorilla is going to drive us away.
Q621 Alan Keen: I recall having the
Chairman of Artsworld, when it was independent, complaining that
the BBC should be restricted because it was difficult for Artsworld
to cope, and I said, "Look, you charge me. I can't afford
to pay for it. You charge me £72 a year for Artsworld yet
at that time the whole of the BBC only cost me £121 a year".
In the end I was delighted that Sky bought Artsworld and I could
watch it as part of the subscription I very happily already paid
for football. Sometimes government needs to intervene, does it
not? Lots of people who have cable complain that they now cannot
get Sky One and some of the other Sky channels and that has suddenly
happened and people are unhappy about it. I know it is part of
competition, but I am such an admirer of Sky because of the sports
content and it is unfair for Sky to suddenly be interfered with
after the great ambition and risk they took, and it seems wrong
that suddenly they should be restricted. On the other hand, a
fault has arisen and the public are unhappy. I know you will say
they could switch from cable to Sky, but what should happen?
Mr Metzger: I am quite concerned
actually. I hope Sky and cable patch it up quite quickly, because
cable is important to us as a platform. We do not want to get
caught in this disagreement at all. The sooner they patch it up
the better it is. I think the notion that Artsworld is an expensive
channel, it is not any more; that was a response to a gap in the
market, the fact that the BBC was not doing the same thing with
arts programming that it used to. Arts programming comes classically
under that PSB sort of banner, does it not. The fact that the
private sector came in there and saw a gap in the market, and
a gap in the market which they wanted to exploit for commercial
purposes, make no mistake about it, turns out to be a good thing.
Everybody gets arts television all of a sudden. This is effectively
the point that we have been making. I do find it ironic in fact
that as we got closer to the Charter again that arts programming
was rediscovered for a moment on the BBC. I think there is an
awful lot of that kind of derivative opportunistic strategy on
the part of the BBC in that regard.
Mr Stelzer: That dispute should
be a public concern if there were a monopoly of programming. If
there is no monopoly of programming this is a commercial dispute
over the price of intellectual property, and those disputes seem
to me best resolved commercially. If there were a monopoly of
this stuff then you would need a regulator to set the price that
would be charged by Sky for this programming. You have got a commercial
dispute going on overlaid by, shall we say, very strong personalities.
I would just let that wind down. I do not think that is a proper
area for public intervention.
Mr Metzger: You are not going
to make the seller take a price. I think that would be most unusual
if the Competition Commission decided that was a good thing to
do. You must accept this price.
Q622 Mr Evans: Ofcom says there is
no evidence to suggest because the BBC are spending £3.5
billion on public service television that they are chasing it
out of the commercial sector. Are they right?
Mr Metzger: That they are actually
stifling competition?
Q623 Mr Evans: Yes. There is no evidence
that the BBC is stifling competition on the commercial channel.
Mr Stelzer: How do they know that?
Q624 Mr Evans: I do not know.
Mr Stelzer: In other words, they
are somehow tabulating all of the people who did not put any money
into television because the BBC is there? They cannot possibly
know that. That is a ridiculous statement for anybody to make.
I am surprised that they would make it.
Q625 Chairman: Their statement in
support of it is, "despite the presence of the BBC, despite
the presence of Channel 4, you will see that the [spending in
this country on subscription and pay TV] is as high in this country
than in any other country", therefore the willingness to
pay does not appear to be affected.
Mr Stelzer: If that is what passes
for regulatory logic I really worry. What they are trying to guess
is how much it would be in the absence of this subsidised competition.
The fact that people are paying X does not mean that that is the
socially optimal amount; it just means that is what it is. To
link those two things in a single sentence is not becoming for
a regulatory agency.
Q626 Mr Evans: One of the argument
that you hear more regularly is that the BBC get £3.5 billion,
which as you quite rightly say is a huge sum of money, with the
confidence that they know what they are going to get, unlike the
commercial channels who rely on subscription and advertising;
and yet they do some programming clearly, and you have just given
one example of it Heroes, where people would say, "Is
that public service television?" Looking at what the BBC
provide, do you believe there are things they are spending licence
payers' money that they should not be spending money on?
Mr Stelzer: Yes, I do, but there
is a complicated problem here. Again, because you are starting
with the notion of public service broadcasting, it is easy then
to morph into the notion that if we do not do some popular things
nobody will watch the other things, as if people do not know when
a programme ends and then can change the channel. Sure they are
doing a lot of things they should not do. Organisations do that.
If you know anything about economic theory, organisations do not
just go away, any more than government agencies do, and say, "Oops,
we've finished our job; we now want to give back £2 billion
of our £3.5 billion because the commercial sector is so brilliant".
That is not going to happen. That is for political constraint
to accomplish. Sure they are doing stuff that commercial people
gladly do—moves, Heroes, whatever. That is why you
go down a slippery slope when you look for some definition of
what is worthy, and instead I think you should look for some situation
where programmes that demonstrably cannot get commercial backing
can be reviewed for the propriety of spending on them taxpayers'
money. That would be a much better way of getting a handle on
what the BBC should be doing. I would doubt very much if that
came to £3.5 billion a year.
Q627 Mr Evans: Do we need the BBC?
Mr Stelzer: It ill-behooves an
American to come and tell you that you do not.
Q628 Mr Evans: That is what Americans
do! Do we need the BBC?
Mr Metzger: I think we do need
the BBC. Certainly we need the BBC until switchover is complete;
there is no doubt about that. There are still quite a few analogue
viewers in this country who pay a licence fee and pay it for the
BBC. In that respect it is part of the deal, yes, absolutely.
Q629 Mr Sanders: Is it not also part
of the satellite or cable deal that you can also get BBC programming
as part of that package?
Mr Metzger: You can but the licence
fee does not pay for that.
Q630 Mr Sanders: Is it not a fact
that actually the BBC licence fee is cheaper than the subscriptions
most people pay to Sky, Virgin or any other provider?
Mr Metzger: Is it cheaper, I do
not know. You can get some pretty cheap packages on satellite
and cable these days. You can pay £7.99 a month for quite
a few more channels than you can get on the BBC.
Q631 Mr Sanders: That would include
the BBC?
Mr Metzger: It would include the
BBC.
Q632 Mr Evans: You need the BBC until
about 2012 or thereabouts, is that what you are saying?
Mr Metzger: If switchover is successful
you mean?
Q633 Mr Evans: Yes.
Mr Metzger: I think the BBC is
bound to wither through market forces. We mentioned funding before—I
find it remarkable we pay more for subscription now than we do
for the licence fee so it has gone beyond that boundary. That
is to say, that people have leapt over that £143, whatever
we pay for the licence, and pay a lot more for a subscription.
The private sector has access to the markets as well. As the BBC
share withers, and it will—it will continue to wither because
that is a function of fragmentation, unless of course the DCMS
allows it to launch many, many more channels—yes, the licence
fee will be in jeopardy eventually. I think the BBC knows this.
The BBC is one of the biggest competitors in the market. You have
to remember it owns a half interest in UKTV, which is one of the
very largest providers of commercial television and subscription
television in the UK; and it is a very successful business for
them as well. I think the writing is on the wall.
Q634 Paul Farrelly: Could I put the
same question to Mr Stelzer. Taking into account all economic
theory, does state subsidisation of a national champion always
damage its own economic self-interest?
Mr Stelzer: No. I think of national
defence. If you guys decided to get your weaponry from Russia
I would rather see you pay more and do it yourselves. When you
ask an economist a question with the word "always" in
it you are going to get the answer I just gave you, because we
immediately think of exceptions to the rule. To your question—I
think it depends what you mean by "wither". I think
that its role, its importance, the function it performs will wither;
whether the organisation will wither is a separate political question.
That is a very resilient, I do not want to say "virus"
but that is what leaps to mind, operation which has withstood
withering so far, and managed to grow as an organisation, as its
market share has collapsed. Jaguar wishes it could do that. It
is very hard. When you say "wither", yes, I agree, the
more channels you are going to get the more, when you digitalise
this country, the importance of the BBC as a source of information
and programming will decline. Whether the organisation will decline
with it I am not so certain. That is a pretty astute political
animal you are dealing with.
Mr Metzger: I think one of the
areas where we probably disagree is that I think there is a role
for public service broadcasting. As Irwin says, institutions have
a tendency to self-preservation; but I think the UK is very different
from the US in this way and it is my belief that it is a good
thing that the democratic institution decide what we want. If
we want to pay for public service broadcasting we want to foster
the values of the society; and we want to do whatever Parliament
decides we want to do, then we should continue to do that. I do
believe it has made for very good quality television in this country—there
is no doubt about that.
Chairman: We are running out of time.
I am going to move us on because there are one or two specific
areas we want to address, in particular one area where there may
be some evidence of market value, which is in children's programming.
Q635 Rosemary McKenna: Despite the
fact that British children now have access to more television
than ever before some people are concerned about the production
of high quality UK-produced content. What contribution do satellite
and cable broadcasters make to UK-produced content for children?
Mr Metzger: Irwin has just shown
me very kindly the passage I was looking for before and, in fact,
satellite and cable television provides 79% of children's programming
in this country at the moment in terms of broadcast hours.
Q636 Rosemary McKenna: But United
Kingdom produced content is separate. You provide more content
but what proportion of it is produced in the United Kingdom?
Mr Metzger: I do not have the
figures in front of me but I can certainly provide those to the
Committee in terms of pounds spent.
Q637 Rosemary McKenna: You see, one
of the issues is that the BBC have reduced their locally produced
content and so there is a real concern around that in terms of
developing the skills and keeping the skills within the country
of independent production.
Mr Metzger: Has there been a reduction?
Q638 Rosemary McKenna: Yes, there
has been, and ITV as well. Both have reduced their locally produced
content.
Mr Metzger: I was not aware of
that.
Q639 Chairman: I think our concern
is that the commercial public service broadcasters are all backing
out of children's television as fast as they are being allowed
to do so, which is leaving the BBC as really the sole provider
of United Kingdom's commissioned children's programming, which
even the BBC say they are not very happy with. One of the suggestions
which was made was that the satellite and cable channels might
be encouraged, at the least, perhaps to produce simply, the suggestion
was to us I think, an hour of United Kingdom children's content
a week, but do you see any way in which UK content can be supported
more by satellite broadcasters?
Mr Metzger: Well, I think there
are some disincentives at the moment. One of those I think is
probably the BBC because it does have two rather substantial channels
for children. I know there is certainly a debate going on right
now about food advertising, for instance.
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