Examination of Witnesses (Questions 640-657)
SATELLITE AND
CABLE BROADCASTERS'
GROUP AND
MR IRWIN
STELZER
12 JUNE 2007
Q640 Rosemary McKenna: Would that
have an impact? Obviously that would have a substantial impact
on cable and satellite.
Mr Metzger: It would, because
it is advertiser-funded.
Q641 Rosemary McKenna: So how do
you balance the demand of parents to have less advertising in
children's programming with the cable and satellite broadcasters?
Mr Metzger: I think it is a balancing
act, there is no doubt about it, but if you deny them the ability
to accept advertising from some of their larger supporters, companies
like Procter & Gamble and Unilever talking about sweets and
things like that it is going to make it a lot harder for them
to produce local content, and certainly channels like Nickleodeon
do produce local content. They certainly cannot compete at the
level of the BBC, clearly, but it is going to make it even harder
for them.
Q642 Rosemary McKenna: Do you think
it is important, though, that there is competition for BBC for
children's programming? To be honest, BBC children's programming
is superb, but should there be competition?
Mr Metzger: I think there should
always be competition. Certainly it holds the BBC to task in delivering
value and innovation. We always talk about the BBC being the standard;
I think there are many areas in which the agenda has been set
by the commercial sector and, if you are talking about animation,
for instance, the commercial sector certainly provides some of
the best animation, the most artistic, the most creative, that
there is in the world, really. So yes, I think competition is
good.
Q643 Rosemary McKenna: Irwin, you
made an aside earlier on about the advertising issue in supermarkets.
Do you want to expand on that?
Mr Stelzer: I do not think I can
usefully, so I will just be brief. The question of children's
programmes seems to be separate from the others simply because
it is a protected class, in a certain sense. The fear of advertising
to children I have always had difficulty understanding since the
children do not have any purchasing power that their parents do
not possess. When we went into a supermarket if my son wanted
something I did not want him to have he did not get it; it seemed
to me rather a simple process. I recognise that in current society
that is not necessarily the model, and there are exposed groups
of children that are susceptible to advertising. I do not see
that as a threat but, again, everything has a cost. If you want
to eliminate advertising on commercial children's programmes you
are going to get less commercial children's programming. That
is your problem as politicians—you have trade-offs all the
time, there is very little black and white, so if you say: "We
do not want sweet cereals advertised on children's programming"
you are going to get less children's programming. You may say:
"That is fine, I will do with less, I have the BBC out there,
they are doing a pretty good job". I also do not worry as
much about domestic content because I think the superb international
animation that you see around that the children love is really
quite good and if it is not domestic it does not matter to me.
Now, there is this question of culture and acculturation which
I guess is important, but you have a pretty good balance. You
have some very good children's programming on BBC; you have some
very good children's programming in the commercial sector; it
is always interesting to me that everybody wants to have more
and more children's programming but they also do not want children
to watch television. That is a whole other contradiction that
you have to resolve. You do not have a bad balance now and I would
hesitate—and maybe I am very conservative—to interfere
with the current balance.
Q644 Mike Hall: All this session
has been more or less dominated by the BBC so I will just read
out the opening line to our context of today's session. "The
focus of today's session is the provision of public service media
content by private broadcasters, outside the traditional system
of public service broadcasting institutions and subsidies".
So can I get right to the hub of this particular thing? What do
you think about the licence fee? Is it fine as it goes?
Mr Stelzer: I think the licence
fee has several things wrong with it, other than compulsion. One
is it is inequitable because it has no means testing component
to it. Now, I am not for means testing when you come to pensions,
but the fact is that you have a system that cannot accommodate
the multiple-set user versus the single-set user. I think that
could be more easily handled with a tax on the set itself when
it is sold, so that is one reason. Another is it is unrelated
to the use of the system. The third is the intrusive and expensive
means of enforcement. It defies everything Adam Smith said about
a tax. You have spies roaming loose in trucks listening in on
people's houses at great expense to haul anyone before them, including
lots of people who do not have television sets at all. So if you
want to fund public broadcasting this is not an efficient way
to do it and it is not an equitable way to do it, and if you want
to do that I think you should think about a different system which
might be related to the number of television sets. What you do
is you jigger it so you introduce means testing if you are very
old or if you are blind or you try to introduce different offsets
to the inequitable nature of the system, but I think if you are
going to be thinking about this for the next four or five years
and if you are going to have some sort of subsidy for public service
broadcasting, either roll it into the tax system or find a fairer,
more efficient way to collect the money.
Q645 Mike Hall: So you would replace
it by subscription?
Mr Stelzer: But subscription does
not do the job you want to do for public service broadcasting.
It does the job I want to do for introducing market forces but
if you want to go down the route of having some funding not related
to what people want to see because you think it should be out
there and you think there is some social good to having something
out there, find a different way to fund it. This is not an equitable
means of funding.
Q646 Mike Hall: I do not want to
try to put words in your mouth but basically I think you are making
the case for it to come out of general taxation.
Mr Stelzer: General taxation seems
to me would be fairer in the sense that it would at least introduce
means testing, number one, of some sort because you have a progressive
tax system but, number two, it would force the politicians to
trade off for their constituents this expenditure against other
expenditures. Right now you have this sort of ring-fenced thing
which it has been decided is more important than garbage collection.
Now, I wonder, if you put that to a vote what would happen. So
if you had it in the tax system you would at least force decisions
about priorities which now you do not have to do. So if you are
going to have it I just do not think the funding is being done
in an optimally efficient way.
Mr Metzger: I largely agree, certainly
in terms of the inequities and the inefficiency of the system.
Should the BBC be funded out of public taxation? Well, certainly
for as long as we have analogue television sets, I think, and
people who are dependent upon that, yes. I am not sure about the
digital channels, however. I think there might even be a case
for them to go to subscription. I think public service broadcasting
should be funded out of taxation, though. I think Parliament should
decide what we need and the Treasury should fund it.
Q647 Mike Hall: In the interim we
still have the licence fee exclusively funding the BBC. Do you
think there is a case for it to be used further afield beyond
the BBC to other programme providers?
Mr Metzger: Top-slicing, you mean?
Q648 Mike Hall: Yes.
Mr Metzger: I think if you do
top-slice the BBC is going to compete even more fiercely. The
justification for the licence fee is very much connected to the
use and to share, and if you do top-slice there is a risk they
are going to do less of the good things, quite honestly.
Mr Stelzer: I do not know; I have
not thought that one through. I would like to see some sort of
competitive bidding for these funds by programme providers, but
I have not thought through the implications of what Geoff has
been discussing.
Q649 Mike Hall: One of the implications,
of course, is that if you provide the licence fee to a commercial
organisation you might feel that they lose their independence.
Mr Stelzer: Well, you would certainly
create a larger constituency for the perpetuation of this system,
which would make me a little nervous. I am trying to guess which
rubber glove I want to buy to handle this, and I have not thought
that one through!
Q650 Paul Farrelly: I would hate
Mr Stelzer to go away with having a monopoly of Adam Smith. He
might disagree and say: "Actually, by all measures of taxation
the licence fee is simple, easy to collect and very efficient
because it is very difficult, like any property tax, to avoid".
Mr Stelzer: First of all, it is
not easy to collect; it is a very expensive collection system.
Second, Adam Smith came out for progressive taxation, remember?
He said the people who can afford it the most should pay the most.
You do not have that with this. In fact, you have almost an inverse
situation. You have the people who cannot afford to go to the
theatre and the opera and so on who are more reliant on television
paying a larger portion of their income for this than people who
have higher income. I had a debate at the University of Edinburgh
with your Chancellor on the tax principles of Adam Smith—he
picked the venue, I did not realise how hostile they would be
to me, but I think I did alright!—so I happen to have read
Smith recently and I do not think this is consistent. But I will
look it up again.
Q651 Alan Keen: On progressive taxation,
it is very unscientific but in a way what worries me is if the
way BBC goes is the very opposite. I think the people with less
money with kids who get less benefit through the family get, inversely,
more benefit from the BBC in the way of education. I have said
many times I have been educated by the BBC. I escaped from education
as fast as I could. I left grammar school at 16, I did not want
to go on to further education—I did not frankly ever understand
what universities were, I am getting on a bit now—and I
have said many times that I have been educated by the BBC, and
I feel for the working class kids, if you like, who would lose
out more than anyone else if the BBC went.
Mr Stelzer: It is a reasonable
fear.
Q652 Chairman: Can I put to you the
core question of this inquiry that we are conducting at present?
Up until now we have managed to sustain plurality in public service
broadcasting through what Ofcom describes as the compact, that
commercial broadcasters agree to provide public service programming
in return for access to limited spectrum. That cannot continue.
Digital switchover means that the advantages to the commercial
broadcasters disappear and they are not going to do something
which is not in their interests any longer. The two questions
are: does it matter if we see a reduction in plurality in public
service broadcasting and, if we consider that it does matter,
how do we sustain it?
Mr Stelzer: And you measure plurality
how?
Q653 Chairman: Well, by having some
public service content on channels other than the BBC, however
we define public service content.
Mr Stelzer: I fail to see why
that would start to wither under the scenario you are suggesting.
People will want to see it. The nice thing about all these channels
is you can dice and slice. It used to be if you did a programme
you had to appeal to a mass audience and you do not have to do
that any more.
Q654 Chairman: So your answer is
the market is going to do it?
Mr Stelzer: Yes, I think the market
will provide sufficient plurality. There are circumstances where
that might not be true but I do not see it here. You have, especially
in Britain, enormous creative talent. You have conquered the American
magazine industry, the American advertising industry, and the
American music industry with British creativity and more power
to you, so to worry that somehow you are not going to get this
flowering of creative expression, these choice multipliers, I
think is misplaced.
Mr Metzger: I agree. If there
is reduction in PSB and a plurality of PSB then I think that there
are ways in which to sustain it. I think the Burns Committee had
a pretty good idea, actually, a kind of contestable funding idea.
We as commercial broadcasters would all be interested in competing
for funding and playing according to the rules as well. If they
decided that there was not enough—I do not know, history
of South Asia for instance, for the South Asian population to
this country and they wanted to create programmes about that,
we would very happily compete for that funding or find production
partners who wanted to go into that business. Also they might,
for instance, set quotas for how many impacts, how many times
that programme had to be seen, for instance, and we are the best
providers in distribution terms and the market is the best provider
in distribution terms of precisely that kind of sustainability.
Q655 Adam Price: I think you have
already indicated that you are unconvinced by Ofcom's case for
a new institution, a public service publisher, but do you still
think there is a role for public funding of new media content,
either through the BBC's on line activity or, indeed, the commissioning
of new media content by others?
Mr Stelzer: I worry that that
will stifle private sector initiative in creativity. Remember,
you are not dealing here with an organisation that has won its
funds in a commercial market by satisfying consumer demand and
is now looking to find other ways of satisfying consumer demand;
you are dealing with somebody that has been given a huge pile
of money and all bureaucracies—and this is not to criticise
the BBC—as they get bigger get less creative and tend to
rely on muscle rather than on creative innovation, speed and the
other virtues of a private sector. So just as with any other dominant
firm in competition terms, if you are dealing with the Competition
Commission, you would view with greater suspicion the expansion
into cognate areas of a firm that is dominant in one area and
I would not say no but I would be very careful about allowing—because
it would be doing it by muscle rather than talent—that expansion
because the trade-off is very high and, as the exchange with the
Chairman showed, very difficult to measure. Ofcom cannot sit there
and say: "Who would have appeared had we not done this?"
That is not an answerable question. So I think you need somebody
with kind of a bias in favour of asking hard questions about the
dangers to efficiency and public welfare of this kind of expansion.
I would view it with considerable suspicion.
Q656 Adam Price: Is that not an argument,
though, in favour of the public service publisher idea instead
of the BBC, through its on line activity, dominating the public
service activity in the new media environment, creating a different
institution which is more of a commissioning model, encouraging
providers within the market and detached from the BBC as a monolith?
Mr Stelzer: But why would you
want to do that? If there is any sector that has an enormous creative
ferment going on and enormous availability to it of risk capital,
this is it. I have great regard for Ed Richards but I do not think
he is as good at this as thousands of private entrepreneurs would
be so no, this groping around for the big organisation that is
going to fix things is just taking public policy in a very wrong
direction. There is no failure out there of innovation. Steve
Jobs does not need Ed Richards to help him develop the iPod or
the iPhone. He is pretty competent to do it himself.
Mr Metzger: I do not have a lot
to add. On line content is content; it is like all the other content
really, I think, so I do not really make too much of a distinction
there. I do think the PSP is kind of in search of a mission. What
it started out as was something different to what it is now, which
has kind of switched into a kind of on-line role and that sort
of thing. The 100 million they have set aside, I am not sure how
they have reached that number but it does not make a dent by comparison
with the £3.5 billion, for instance, spent on the BBC. We
are not wild also about the idea of placing it under some sort
of umbrella. You described it as a commissioning body. In fact,
I think there is a risk that if you do create this other figure
you are just creating another sort of institution of privilege,
so to speak, and you are not really creating plurality, I do not
think. I certainly agree with Irwin that this is a sector that
we are extremely active in. Without trumpeting our own website
if you go to the History Channel's website it is the second best
referenced history site in the UK, second only to the BBC, and
the BBC recommends it highly as well, so there is no kind of plurality
gap here, certainly on the web.
Q657 Adam Price: Are you saying there
is no market failure at all in new media?
Mr Metzger: What comes to mind
here is, if you look at the COI, it spends a lot of money every
year and it spends money providing public service messages. And
what does it do? Where it spends its money is in the commercial
sector, of course, because that is the best place to deliver its
messages, as it were, and this is by and large the same sort of
thing. If there is a gap, whether it is on line or on air or whatever,
then I would be in favour of a Burns Committee type organisation
which says: "We need to spend money in this way", and
it may not be on content; it may be in the way the COI does in
buying referencing on the Google search engine, because a man
in Aldershot cannot find sufficient information about how to make
a good democratic choice, for instance, because he cannot find
his local council's website, as an example. But I do not think
that creating another institution is a solution here.
Chairman: We have ranged far and wide
this morning! Thank you both very much.
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