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Memorandum submitted by Northcliffe Media Ltd
Inquiry into the Commercial Operations of the BBC
We are writing in response to the request for written evidence to be submitted in connection with the Select Committee's inquiry into the commercial operations of the BBC.
Northcliffe Media is one of
Within this context, one immediate issue of concern is the BBC's controversial
proposals for a major expansion of its existing website services to provide
local video news, sport and other coverage in some 60 local and regional areas
across the
In the course of 2006, as part of the discussions on renewal of the BBC Charter, a Framework Agreement between the BBC and the Secretary of State for Culture, Media and Sport was laid before Parliament. As the Committee will be aware, this Agreement states that the BBC Trust 'must represent the interests of licence fee payers and exercise rigorous stewardship of public money' and that it 'must have regard to the competitive impact of the BBC's activities on the wider market'. Both Ofcom and the BBC Trust are presently examining the BBC's local video proposals. We believe it will be a major test of the current governance arrangements for the BBC's proposals to be assessed properly and objectively against these criteria.
We would not contest that the BBC, as the national state-funded broadcaster, provides a good national service in many ways. However, as our attached submission details, we believe that it is highly questionable whether it would be in accordance with either the criteria laid out in the Framework Agreement of 2006, the aims of the Communications Act 2003, or indeed the wider public interest, for the BBC to expand its local on-line news activities so significantly. We would welcome the Committee addressing this important issue, amongst other matters, in the course of its inquiry. We would be happy for our attached submission to be made public as well as available to the Members of the Committee and we would, of course, also be happy to submit any further written evidence if requested if that would be helpful to the Committee. Executive Summary
1.1 Northcliffe
Media, the
1.2 In
announcing the terms of this inquiry, the Committee has stated that it seeks
views on issues related to the BBC undertaking commercial activities in the
1.3 We would therefore invite the Committee to consider our concerns set out below, which are shared by other media companies, about the BBC's plans to enhance massively its local online news provision, collectively known as the 'BBC Local Video' proposals.
1.4 The terms of the BBC's Charter and the
Framework Agreement between the Government and the BBC, concluded in June 2006,
require the BBC Trust to
undertake a Public Value Test (PVT) to assess the public value and
1.5 The
BBC is the world's most powerful and generously funded media player. It provides an excellent service in many
ways. It has used its massive public
funding and resources, brand potency, unrivalled distribution network and
cross-promotional opportunities to become the leading
1.6 The scale and scope of the BBC's proposals for expanding its local video and website services is considerable. According to the application that the BBC has made to the BBC Trust and Ofcom, the BBC is proposing to expand greatly its existing website services to provide extensive local video news, sport and weather reports, with the proposed new content consisting of daily bulletins of news, sport and weather updated up to 3 times per day, together with additional video coverage linked to the BBC's arts, culture, nature and heritage output. There will also be up to 10 video stories per day in each area. The BBC has stated that its aim is for this proposed expansion to roll out in some 60 local geographic areas across the UK with effect from 2009-10 onwards.
1.7 The proposed BBC investment in these expanded local video and website services would also be considerable, amounting to some £68 million in total: it is proposed this begin in 2009-10 and then increase by increments each year until reaching maturity at around £23 million a year in 2012-13. The service would build upon and be supported by the BBC's current £100 million spend on regional news provision and benefit massively from cross-promotion from the BBC's existing multiple audience touchpoints. 1.8 If permitted to proceed, the BBC Local Video services would:
· Accelerate print circulation decline (vitally important for those without access to the internet) and seriously undermine usage of our websites and other digital services. · Thereby limit our potential to achieve audience growth. · Reduce the desirability of our websites and other digital offerings to advertisers. · As a result, damage our revenues, profitability and therefore ability to continue to invest in local media services. · In time, lead to an overall reduction in plurality in local media in the long term and lessening of consumer choice.
1.9 Northcliffe
and other regional media groups provide a wide range of digital news and
information services and have invested heavily to do so at a time of
1.10 The BBC has immense potential to undermine commercial media
ventures. It has become clear over time
that, when the BBC colonises a media sector - as it intends to do through the
Local Video plans - this results in a serious weakening of commercial operators
and the plurality they bring. ITV and the commercial radio groups have suffered in this way as the BBC has commanded
a larger
1.11 There
is growing evidence across the media sector of the BBC's enormous power
disrupting and distorting commercial
1.12 The
terms of the Royal Charter for the continuation of the BBC (clause 23) and the
terms of the Framework Agreement between the BBC and the
1.13 In
summary, we believe there is no significant public value in the proposed new
BBC Local Video service: it is not distinctive, it does not meet an unfilled
1.14 We would accordingly invite the Committee to give consideration to this important matter within the context of its current inquiry into the commercial operations of the BBC. We believe that both Ofcom and the BBC Trust, currently conducting their own assessments of the BBC's proposals, should also be encouraged to take the Committee's findings into account before reaching a final decision on the BBC's proposals. 2. Northcliffe as a multi-media publisher
2.1 Northcliffe
Media is one of
2.2 Across
Northcliffe, our businesses are transforming rapidly from newspaper publishers
to dynamic, multi-media businesses, at a time of
2.3 Northcliffe's focus on developing digital platforms and content is reflected across the regional media industry. According to the Newspaper Society, the industry is now comprised of 1,300 "core" newspapers and almost as many - 1,100 - websites, as well as 750 magazines, 36 radio stations and 2 television stations. [1] Overall, despite difficult economic conditions, the industry has worked hard and invested considerably in the provision of online news and advertising services to complement (and help ensure the continued publication of) its existing local and regional newspapers.
2.4 The profit per individual customer from commercial news websites is however limited. Consequently, the commercial viability of regional media groups extending their online provision of local news and other content is dependent upon achieving significant audience growth and reaching new consumers. We believe the BBC's Local Video proposals would constrain substantially the industry's ability to achieve this growth.
3. Industry context
3.1 Northcliffe is making rapid progress towards our goal of becoming a dynamic, local multi-media business. This has required some tough decisions. We have integrated tasks and processes (ie. for both print and web media) while reducing our cost base and staff numbers significantly. This has been difficult, but necessary, to ensure we are in the best possible shape to meet the challenges of publishing in the multi-media age.
3.2 However, like the industry as a whole, our progress has been challenged by the credit crunch and the resultant severe economic downturn, which seems likely to be prolonged. As a sector largely dependent upon advertising revenues, it is widely acknowledged that media has been amongst the hardest hit industries. Revenues are under severe pressure and this is reflected in historical lows for media company stocks.
3.3 In recent months, amongst our competitors in the sector, Johnston Press completed a heavily discounted rights issue to secure £170 million to deal with the downturn, while Trinity Mirror's share price slumped 28% in a single day after it issued a profits warning. Newsquest, a subsidiary of American media giant the Gannett Corporation, reported a 19% drop in its classified advertising revenues in June.
3.4 In our own case, in a trading update issued on 25 September 2008, our parent company DMGT reported that UK underlying revenues for Northcliffe Media were down by 7% in the 11 months to August 2008, with deterioration in advertising for Northcliffe in July and August, particularly in Recruitment and Property, with comparable revenues down on the period by 22%. Trading conditions in the sector remain difficult.
3.5 We argue that the BBC's proposals show
insensitivity to - or even disregard for - the challenges faced by commercial
media in the regions. Our industry is
facing the most challenging conditions for decades as rapid changes in consumer
and advertiser habits and a severe economic downturn coincide. As
noted above, the commercial media industry has been taking the tough decisions
necessary for its continuing survival, but permitting the BBC to increase
enormously its presence in local
4. Audience development
4.1 In common with other regional groups, the circulations of Northcliffe's paid-for newspapers have been in decline for many years, albeit from a high base. This trend reflects changes in society and lifestyles, advances in technology and the increasing choice of sources of local news, information and advertising.
4.2 However, this decline has to date been compensated to some extent by growth in our online audience, even though future developments in this highly competitive sector remain uncertain. Across Northcliffe's range of regional 'thisis' websites, we had a total of 3.3m unique users and 46m page views in September 2008, representing increases of 35% and 23% respectively year on year. In that month, the average number of visits per unique visitor to Northcliffe sites was 2.5 visits per month.
4.3 A key business objective for Northcliffe is to increase the frequency of visits by users to our websites and the duration of these visits. Increases in repeat visits will indicate that our sites are increasingly popular with users and even more relevant to them.
4.4 We believe the Local Video proposal to enhance substantially the BBC's local websites will inevitably limit our potential to increase the number of users of our websites, frequency of visits and visit durations. People's lives are increasingly busy and all media operators are engaged in a constant battle for the limited time and attention of consumers. Greater choice invariably leads to fragmentation of media usage.
4.5 We have no issue with commercial operators competing aggressively with us for audience time and attention. However, competition from the BBC is very different. The BBC already has a powerful presence in local and regional news through its TV, radio and Internet services, all funded generously from the licence fee and benefiting hugely from cross-promotion and cross-fertilisation across the BBC's many platforms.
5. Revenue development
5.1 In
common with most regional publishers, Northcliffe
5.2 Print
revenues are declining. Between the 2003/4 and 2007/8 financial years,
Northcliffe
5.3 We accept that our core print business is mature and our scope for growth is in digital publishing. This is why so much of our focus is on developing digital platforms and services. We believe our future digital revenues will be almost entirely from advertising and that these revenues will be dependent upon the development of a larger and wider local audience which engages more frequently with our digital platforms.
5.4 However,
our concern is that if the BBC is permitted to enhance its local websites, it
will inevitably gain a significantly larger share of the online
5.5 In
view of the crucial importance of audience to the development of services and
subsequently revenues for commercial media operators, we invite the Committee
to question whether the BBC should be permitted to enhance its position in the
6. Editorial and commercial content inextricably linked
6.1 The BBC says it will focus Local Video on content such as news and sport, specifically excluding obviously commercial areas such as jobs and property. However, it is disingenuous for the BBC to claim that drawing such a distinction between editorial and commercial content will mitigate the impact on commercial operators.
6.2 Audience and traffic to and through the editorial sections of Northcliffe's range of regional 'thisis' websites, such as news and sport, as well as to the home page, are considerable. We derive significant display advertising revenues from these sections, which are popular with advertisers because they have the most traffic and the audience spends longer with each page. It is also important to emphasise that we drive a high percentage of users from the home pages of our websites through to our classified sections. For example, analysis of visits to 'thisishull' in March 2008 showed that the home page generated 60% of visits to our jobs pages, a major source of income.
6.3 Accordingly, any suggestion that a reduction in readers of the editorial sections of our regional news website would not materially affect readership of our commercial content is misleading. Reduced visits to our home pages because of significantly enhanced local provision from the BBC would inevitably reduce visits to our commercial content. In turn this would result in diminished response to digital advertising, weakening and threatening our sales proposition and revenues.
6.4 The overall effect is likely to be highly damaging and have wider consequences. Not only are significant audiences needed to generate meaningful revenues. Revenues in turn fund our extensive, in-depth editorial coverage, which we believe is vital to community well-being and the public interest.
6.5 This extends to the publication of views,
opinions and commentary by local elected representatives. Of course, local media does not and will not
automatically publicise the views of local politicians on all local issues -
but the larger and better-read regional titles in particular do at least offer
the opportunity to convey such views to a wider audience, for politicians of
all parties. In contrast, by the terms
of its Charter and the associated Framework Agreement between the BBC and 7. BBC Local Video: Non-distinctive, substitution services
7.1 We reject the BBC's claims that Local Video offers a distinctive service. We believe it is clear that the BBC's proposed new local services would largely replicate or substitute those already provided by the commercial sector.
7.2 The BBC's Royal Charter review document published in May 2005, Building Public Value, highlighted as one of the Corporation's objectives meeting the needs of the UK audience not already met by other organisations. Despite this, the BBC's strategy in its Local Video proposals is to deliver services which are already provided by regional media and many other organisations in print and online.
7.3 BBC
Management claims that its proposed enhanced regional websites would serve
areas significantly larger than local and regional newspaper circulation
boundaries. However, this statement does
not stand up to scrutiny. The BBC
proposals are for some 60 enhanced regional websites across the country (or 65
if the Welsh language services are counted).
These enhanced sites would in fact focus on major cities and communities
already served by regional daily newspapers and their sister websites
(including those owned by Northcliffe).
It is significant that the proposed number of Local Video services is
close to the total number of
7.4 This means that the BBC's proposals would impact directly and seriously upon those regional titles and associated websites which provide the most in-depth coverage of local public affairs and issues of public interest and importance.
7.5 The following are some of the proposed BBC sites whose catchment areas will replicate directly, or largely overlay, those of Northcliffe daily titles and their websites:
· Bristol (Bristol Evening Post & www.thisisbristol.co.uk) · Derby (Derby Telegraph & www.thisisderbyshire.co.uk) · Leicester (Leicester Mercury & www.thisisleicester.co.uk) · Lincolnshire (Lincolnshire Echo & www.thisislincolnshire.co.uk) · Nottingham (Nottingham Evening Post & www.thisisnottingham.co.uk) · Staffordshire (The Sentinel & www.thisisthesentinel.co.uk)
7.6 The BBC's claims also fail to take into account that, in many areas, regional newspapers have websites that cover the circulation areas of several newspapers. Once again there are several examples of BBC Local Video services competing directly against Northcliffe websites which bring together content from editorial teams attached to several of our newspapers. Below are some examples:
· Cornwall (www.thisiscornwall.co.uk) · Devon (www.thisisdevon.co.uk) · Gloucestershire (www.thisisgloucestershire.co.uk)
7.7 The map on the following page illustrates how the proposed BBC Local Video services will duplicate Northcliffe websites offering local video news. A similar pattern of overlap applies to the regional websites of other media organisations such as Johnston Press or Trinity Mirror: almost all the proposed BBC Local Video services compete directly against websites owned by regional newspaper publishers. The BBC's claim to be introducing a new geographic level of video-based news content is simply not true.
7.8 The core delivery medium of the proposed BBC service - video - is also in no way distinctive in the provision of local or regional news. Indeed it is now commonplace. Of our existing websites, approximately 30 already carry purely local video content. These include almost all the sites comparable with the BBC's proposed Local Video services. Northcliffe's video content ranges from bulletins to news and sport reports, leisure and entertainment, community events, local government webcasts and commercial content. Video content is being developed continually across the 'thisis' network.
8. The BBC's power and reach
8.1 The
BBC has sought to downplay the scale and scope of its proposals by claiming
that the weekly reach of its Local Video enhanced website proposals would be
some 11% of
8.2 In fact, we believe it would still be an underestimate to suggest that, in five years, the Local Video service would be used by approximately the same number of people as reached currently by BBC local websites. Local Video is not a discrete proposition. It is effectively a major expansion of content on the BBC's local websites. We believe it is inevitable that the BBC's proposed website enhancement would drive significant growth in usage of these sites, at the expense of commercial providers.
8.3 The
BBC's online audience is enormous, both in the
8.4 We
fear that intentionally or unintentionally the BBC's proposals will use public
funds effectively to buy a much greater share of the
8.5 Other publishers have voiced serious concern about how the BBC and its funding and reach are undermining commercial websites. Notably, Ed Roussel, the Telegraph Media Group's Digital Editor, has said the BBC should be conscious of its impact on the private sector, especially when the industry was in a "precarious moment". [5]
8.6 For
decades commercial media operators have been content to co-exist with the BBC, but they have become increasingly alarmed by
the BBC's ambitions and its ability to distort commercial 9. Impact on plurality and diversity of local coverage and voice
9.1 In common with those of other commercial regional media organisations, Northcliffe's newspapers and websites act as the champion for, and on behalf of, local communities, campaigning on issues of interest and concern to local people. This is clearly not a role specifically envisaged for the BBC under the terms of its present Royal Charter. Any diminution in the audience and role of regional media companies would affect adversely their ability to reflect the concerns of communities and campaign on issues of local importance. This would be manifestly against the public interest.
9.2 Northcliffe's newspapers are all unique and individual in their approach, content and design. All of them have editors who live in and are deeply committed to their localities. Necessarily, our websites have more uniformity but they also reflect the issues and interests of the communities they serve and our passion for local life.
9.3 The
BBC has no such local identity or affinity.
The BBC's immense power can have a significant impact upon local
9.4 Despite the growing influence of the Internet, local and
regional newspapers remain by far the most popular source of information for
people about the area in which they live.
A
9.5 Recent research commissioned by the Newspaper Society has also shown how local newspapers and their websites influence local life positively. They are rated top of a range of media for "feeling part of your local community", "having pride in the local area" and "knowing about local institutions, services and facilities". [7]
9.6 These
findings suggest that existing regional and local media publications are
generally highly valued. We believe the
proposed substantial development of BBC local services would diminish
significantly the audience and the viability of local and regional newspaper
publications, to the detriment of local communities and the plurality and
diversity of local media provision. We believe this would be a further step to
the BBC becoming the foremost player in local and regional news and
information, sidelining and diminishing print publishing and reinforcing its
domination of the
9.7 The 9.8 It is
apparent from these developments that ITV is reducing greatly its local
services and potentially abandoning local news.
Ofcom and other interested parties have expressed hope that new
commercial players will come forward on the digital television spectrum,
increasing plurality of local provision.
Potentially these could include commercial regional media
organisations. However, media convergence
means that the battle for audience and revenues cuts across traditional media
boundaries. If approved, we believe that
the BBC's Local Video proposals would pre-empt and discourage investment in
local TV services, as an increased
9.9 The combined effect of these developments would be the opposite of that intended by Parliament in debating and approving the Communications Act 2003. At the time of the publication of the Communications Bill in November 2002, the Government laid great emphasis on the importance of safeguarding and protecting 'the diversity and plurality of our media'. [9] The importance of variety and consumer choice was further emphasised when the Bill was debated in Parliament. [10] The Communications Act 2003 envisaged a continuing and important role for the BBC - but the BBC's latest proposals go beyond this: by replicating and potentially replacing the range of local and regional news and related online services provided by commercial media, they threaten to reduce media plurality and diversity, in contradiction to the stated aims of the Communications Act. Since Parliament has not modified the Communications Act to remove these objectives, we believe the serious potential consequences of the BBC's proposals are therefore relevant to the Committee's inquiry in legislative as well as policy terms.
10. Implications for BBC spending
10.1 The BBC has said there will be, on average, 6 video journalists for each of the 60 Local Video services at the end of the proposed 5-year rollout in 2013. This will be in addition to around four staff per service for existing BBC local websites. The BBC will therefore be putting into the field a total of approximately 360 new audio-visual news-gatherers.
10.2 The BBC claims the net spend is zero, on the basis that the expansion of its local website services will be funded fully from savings in the Nations and Regions budget. However, this has not been explained adequately. There is no clear indication of any existing local and regional content-gathering resource being withdrawn. Therefore we are dubious about the claims of no additional spend on local and regional services. In July, we posed several questions to BBC Management in relation to this and requested specific details on the costs of the proposed new service. These questions were re-routed via the BBC Trust, which has yet to provide any answers. Further requests for this information from the BBC Trust have been denied.
10.3 Our scepticism about the claim that Local Video will be delivered at no additional cost to BBC Nations and Regions is compounded by the revelation that bbc.co.uk exceeded its budget by £36 million (48%) in 2007-8. [11] The BBC Trust said this was a "serious breach" of the bbc.co.uk service licence. Despite this, the BBC plans to almost double the overall cost of bbc.co.uk to £150m within two years.
10.4 Irrespective of how the proposed service will be funded, we believe that it is highly questionable whether it would be in accordance with the criteria laid out in the Framework Agreement of 2006 between the BBC and Secretary of State for Culture, Media and Sport, the aims of the Communications Act 2003, or indeed the wider public interest, for the BBC to expand its local online news activities so significantly.
10.5 Clearly the BBC is proposing a significant increase in journalistic resource in the regions. However, we believe that the proposed additional employment of journalists by the BBC, paid for from the licence fee, could well be at the expense of journalists' jobs in commercially funded media companies. Significant additional competition from the BBC will only exacerbate pressures on commercial media and damage their revenues. Given that the effect of the BBC's proposals would be to threaten the commercial viability of a wide range of competing local commercial media, this could result in a net loss of local and regional journalism jobs, as well as a damaging reduction in plurality of coverage and voice in local communities.
11. The BBC's Public Purposes
11.1 We do not believe the BBC's plans for a massive enhancement of its local online services are consistent with the BBC's Public Purposes stated in its Royal Charter, namely:
· Sustaining citizenship and civil society. · Promoting education and learning. · Stimulating creativity and cultural excellence. · Representing the · Bringing the · In promoting its other purposes, helping to deliver to the public the benefit of emerging communications technologies and services and, in addition, taking a leading role in the switchover to digital television.
11.2 The Local Video proposition will not contribute in any meaningful way to these purposes, largely because it will merely replicate - or indeed substitute - services already being provided at no public cost by the commercial sector.
11.3 We are not aware of any evidence that Local Video will sustain citizenship and civil society, promote education and learning or stimulate creativity and cultural excellence in any significant way and there is no clear evidence that these purposes will be promoted in any materially different way from existing provision.
11.4 The BBC
already represents the . 11.5 Video news services have developed strongly, driven by commercial media and by the growth of video sharing websites such as Youtube. Local and regional news in video format is now provided routinely by regional media companies, including Northcliffe. There is no need or justification for the use of public funds to stimulate the development of such services.
11.6 The BBC Local Video proposals will not promote the BBC's Public Purposes. Indeed, we believe that, by proposing to spend millions of pounds of public funds, the BBC will destabilise the role and viability of regional commercial media providers. We believe that this would be a distortion of the BBC's public service remit. We therefore welcome the Committee's stated intention to examine the extent to which the BBC's commercial activities meet the criteria required of them, as well as the appropriateness and effectiveness of the governance framework for the BBC's commercial activities.
Appendix
Northcliffe Media newspapers
Paid-for daily titles:
Paid for weekly titles:
Northcliffe Media primary 'thisis' websites
Primary Sites:
North East Hullandeastriding
Leicestershire Derbyshire Sentinel
South East Total Croydon Today
West & Wales Gloucestershire Westerndailypress Llanelli
South West Weeklies
South West Dailies Westernmorningnews
October 2008 [1] Source: Newspaper Society - www.newspapersoc.org.uk
[2] Section
6, Framework Agreement between the [3] Source: Press Gazette - Guardian
digital director:
[4] Source:
Press Gazette - "
[5] Source:
Press Gazette - "
[6] Source: Press Gazette - Survey finds regional press is most popular source for local news: www.pressgazette.co.uk/story.asp?sectioncode=1&storycode=37543
[7] Source: Newspaper Society - local matters research: How media influences different aspects of people's lives: www.newspapersoc.org.uk/localmattersresearch/media-implications.aspx
[8] SOURCE: Guardian.co.uk - Regional news takes the brunt as ITV slashes 1,000 jobs: www.guardian.co.uk/media/2008/oct/01/itv.television [9] Joint statement by Tessa Jowell MP, Secretary of State for Culture, Media & Sport and Rt Hon Patricia Hewitt MP, Secretary of State for Trade & Industry, November 2002 [10] Source:
Hansard - Rt Hon Tessa Jowell MP, Secretary of State for Culture, Media and
Sport: "The Bill is not simply a device to regulate or deregulate an
industry; it plays a vital role in every one of our wider aspirations for [11] Guardian.co.uk -www.guardian.co.uk/media/2008/may/30/bbc.mediabusiness |