8 BBC Local Video Proposal (not a
commercial activity)
106. In May 2008 the BBC submitted plans to the BBC
Trust to provide a new, on-demand, local video service, delivered
via fixed and mobile broadband internet connections. It came about
from a challenge from the Trust for "BBC management to respond
to licence fee payers wanting better local services".[207]
The proposal would have provided local news and video content
on 65 existing local BBC websites in England and Wales, at a cost
of £68 million over four years. It would not have been a
commercial activity: it would have been funded by the licence
fee, without advertising or any other form of income generation.[208]
However, the proposal was rejected by the BBC Trust in November
2008 "because it would not improve services for the public
enough to justify either the investment of licence fee funds or
the negative impact on commercial media".[209]
Following a three month public consultation on its findings, the
Trust confirmed its rejection of the proposal on 23 February 2009.[210]
107. The Trust's decision came after a Public Value
Test (PVT), which incorporated a Market Impact Assessment (MIA;
commissioned by the Trust but undertaken by Ofcom). The decision
also came shortly after the Committee had itself investigated
the merits and drawbacks of the proposal. In November 2008, during
our oral evidence sessions in relation to the BBC's commercial
operations, we took the opportunity to discuss the local video
proposal with the newspaper and radio industries, and the BBC
Trust and Executive.
108. The BBC's Director General told us that the
local video proposal had been four years in the making, and had
the potential to provide an enhanced local service—in particular
an improved local news provision—for licence fee payers.[211]
However, Ofcom concluded in its MIA that "the launch of the
proposal would have a significant negative market impact on commercial
providers".[212]
This finding was reflected in the evidence we heard from the local
media industry. Sly Bailey, the Chief Executive of Trinity Mirror
plc, one of the UK's largest newspaper publishers, told us that
the resources of the BBC would dwarf the budgets that the local
press has to maintain their own websites, forcing many of them
out of business. She informed us that the local press is already
"absolutely inundated with competition".[213]
Trinity Mirror closed 44 local newspapers in 2008 (140 of its
local newspapers continue to operate).[214]
109. Meanwhile, RadioCentre, the industry body for
commercial radio, told us that the proposed service would have
a "devastating" impact on local radio stations. Its
Chief Executive said last July that 40% of local radio stations
are already unprofitable and that some are beginning to hand their
licences back.[215]
Despite this, RadioCentre report that the local news market is
already well served, with the average commercial radio station
broadcasting 22 news bulletins per day.[216]
110. A total of £1.32 million was spent developing
and assessing the local video proposals, although this does not
include the cost of the time spent on the project by BBC staff,
which the BBC was unable to accurately estimate.[217]
However, it does include £814,604 charged by Ofcom for its
role in the PVT, the Market Impact Assessment. This cost was substantially
more than a "usual" MIA, "due to the complexity
introduced by the need to assess multiple markets" (i.e.
the need to assess the impact in several of the local geographic
markets that the 65 new services would cover).[218]
111. We recognise the benefits that the proposed
local online video service could have brought to consumers, but
agree with the Trust's conclusion that these were insufficient
to warrant the very significant adverse impact on commercial competitors.
At a time when local commercial media services are under extreme
pressure, the BBC should be looking to help rather than hinder
local newspapers and radio stations. We therefore welcome the
Trust's decision to reject the plans, and we hope that this example
sets a precedent whereby the BBC gives necessary consideration
to its impact on the rest of the marketplace. Indeed, it is apparent
that this decision does not necessarily spell the end of the BBC's
ambitions in this area, and the Trust must continue to exercise
caution when reviewing any revised plans. At the same time, we
encourage the commercial media sector to continue to seek to raise
its game in spite of the difficult economic circumstances, and
continually improve the products aimed at local audiences.
207 "BBC Trust begins public value test of BBC
local video proposal", BBC Trust press release, 24 June 2008 Back
208
Q 162 Back
209
"BBC Trust rejects local video proposals", BBC Trust
press release, 21 November 2008 Back
210
"BBC Trust rejects local video proposals", BBC Trust
press release, 23 February 2009 Back
211
Q 162 Back
212
Ofcom, Market Impact Assessment of the BBC's Local Video Service,
21 November 2008 Back
213
Q 81 Back
214
Q 72; Trinity Mirror plc, www.trinitymirror.com Back
215
"Commercial radio attacks BBC local online video plans",
The Guardian, 16 July 2008 Back
216
Radio Centre, Action Stations: The Output and Impact of Commercial
Radio, July 2008, p 38 Back
217
Ev 137-138. The evidence provided by the BBC in January did not
represent the final cost as the process was ongoing. However,
the BBC subsequently confirmed that the final cost was £1,317,278.
Back
218
Ev 138 Back
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