Examination of Witnesses (Questions 67-79)
MR ANDREW
HARRISON, MS
SLY BAILEY,
MR PAUL
VICKERS AND
MS SANTHA
RASAIAH
4 NOVEMBER 2008
Q67 Chairman: For the final part of this
morning's session I welcome Sly Bailey, the Chief Executive of
Trinity Mirror, and Paul Vickers, the Group Legal Director; Andrew
Harrison, the Chief Executive of RadioCentre; and Santha Rasaiah,
the Political, Editorial and Regulatory Affairs Director of the
Newspaper Society. Can we perhaps start with audio? Can I ask
you, Andrew, what impact the growth of BBC Worldwide is having
on your members?
Mr Harrison: The major impact
the growth of BBC Worldwide potentially has on our members is
the focus potentially on audio, video and music content going
forward. Like a number of your earlier witnesses, we have seen
many of the difficulties of the potential lack of separation between
the role of the Trust and the role of the Executive of the BBC
and then indeed the role of the management of BBC Worldwide, separating
out what are specific activities that are legitimate within the
commercial operations of Worldwide and what potentially risk foreclosing
markets or distorting markets. This is a particular concern for
us from a radio and audio perspective going forward because of
the potential opportunity the BBC has to monetise their very extensive
audio archives that go right back to, for example, the beginnings
of popular music and so on and the opportunity to distort markets
as they then potentially make that content available for sale.
Q68 Alan Keen: There is going to
be an even bigger debate than we are having now about the BBC
over the next few years. First of all, would you elaborate a little
further, Andrew, on how you feel the BBC should run itself when
you are looking at competition with your affiliates.
Mr Harrison: The commercial radio
sector is a very small sector, quite a fragile part of the UK
media landscape. For perspective, the total turnover in the sector
is about £600 million, not much more than £500 million
when you take away the commission we need to pay for advertising
revenue. So we are a very small sector. That small sector is made
up of around 320 small commercial radio stations, dotted around
the country in each of your constituencies. On average each station
has a turnover of only £1 million or £2 million. Those
fledgeling small businesses in each constituency are then competing
against the BBC for audience and need to secure advertising revenue
in the wider media market. That puts a great challenge, I think,
on a small sector when it is competing with music labels, when
it is competing for exclusive content for artists, when it is
competing for sports rights, all those sorts of things which should
facilitate strong programming content. It is a real challenge
to do that against a strong market player and a strong state intervention
in the BBC.
Q69 Alan Keen: If I can give you
an example of my own obsession, football, in Middlesbrough, Teeside,
and there was a lot of discomfort when the BBC took over the exclusive
commentary. I think they got all the big three north-eastern clubs.
What would you like to see happen other than that? We cannot give
preference to stations just because they are small. I very rarely
listen to anything other than the BBC. Having switched on LBC
by mistake a few mornings ago and heard Nick Ferrari lying to
his listeners, I do not think I will ever listen to it again,
frankly. Is it a good thing to protect small stations? I like
competition. I always worked in the private sector before I came
to this strange place so I understand competition. If it is good
to have competition—and it is—what can we really do?
The BBC is magnificent. You have heard the last panellists all
saying it is wonderful but it hurts them. This debate is very
important. What would you like to see us recommend to try to protect
these small radio stations?
Mr Harrison: If you take, for
example, the football rights, which is a very interesting point,
the vast majority of Premier League football rights in the UK
are owned by the BBC, as you will know. They can broadcast two
matches live on a Saturday at 3pm on Radio Five Live and Radio
Five Live Sports Extra, as well as matches at other times. The
only national commercial sports station, talkSPORT, also bid for
those Premier League rights but it could only afford to bid for
one of seven packages which were offered by the Premier League.
Local radio then has the chance to bid for the local rights for
each of its sports teams. For example, on Teeside that may well
be TFM competing for the rights for Middlesbrough Football Club
or Sun FM competing for Sunderland or Metro competing for Newcastle
United. In a lot of instances those local rights are then also
secured by BBC Local because they have the resources to bid for
those local rights and, of course, each local club will go to
the station offering the most money. So you have a double jeopardy,
if you like, that on a national basis it is very difficult to
compete and then additionally on a local basis it is very difficult
to compete. Some intervention that gives the opportunity where
there is commercial demand for rights holders to be given an opportunity
to bid for those rights without the distortion of the BBC, with
guaranteed funding, that can outbid commercial operators securing
all the talent and content on exclusive long-term deals.
Q70 Chairman: I am slightly concerned
that we are straying a little way from the commercial activities.
Obviously, this is a core BBC activity. In terms of Worldwide,
the BBC is dominant in the radio sector, with a 56 % or thereabouts
audience share. It obviously has a lot programme content which
is valuable. You presumably would accept that that content should
be made available through podcasting and CD sales and downloading.
Is it your argument that the BBC should not be doing that?
Mr Harrison: No, not at all. We
fully accept that. I think the difficulty comes when the BBC's
market dominance and access to content, either archive or potentially
in the future on an exclusive basis, risks foreclosing nascent
markets or setting market levels that make it very difficult then
for the commercial radio sector to make a return. For example,
any audio podcast that, for example, Classic FM may want to launch
to support its own revenues will be dictated by market price that,
for example, would be whatever Radio Three is also offering on
podcasting facilities and so forth, and inevitably that means
that some nascent markets are foreclosed or the market pricing
is not sufficient for the commercial sector to be able to generate
a return. So you end up with a vicious circle almost, that the
BBC has access to great content, can launch into a market and,
with a potentially dominant role, it then forecloses the market.
A commercial competitor cannot make a viable return, therefore
does not enter the market, so you end up with the BBC as the sole
provider. I suspect that is not what any of us want in terms of
the plurality of provision and diversity of service in the market.
It is when they use their market power potentially to distort
or foreclose nascent commercial markets for smaller operators.
Chairman: I think we had better move
on to the issue which I know all of you are keen to raise.
Q71 Paul Farrelly: This is the local
online video services that have caused quite a lot of controversy.
I come from Newcastle-under-Lyme, which is in Staffordshire, and
I must say that the BBC's experiment with ultra-local TV in Staffordshire
came and went without many people, including myself, noticing.
This seems to be the same proposal in a different guise, just
streaming it through the internet. The question for both radio
and print is why should people not welcome this as another source
of local news and content, particularly if the BBC is as good
as its word in not attracting advertising?
Ms Bailey: It is a broader point
than that. We do not mind competition. You have heard that from
many speakers this morning. It is unfair competition that we are
objecting to. We all love the BBC. Again, we have heard that numerous
times this morning. The question is, would we love it quite as
much if it were the only thing that we had? A test might have
come and gone but we are now talking about £68 million of
public money and 65 regional websites containing local video.
Again, we have heard this morning that video is an integral part
of success on the web but it is difficult to monetise it. Our
business online is driven by advertising revenue and to generate
advertising revenue we have to have eyeballs. If the BBC come
in and distort the market for eyeballs, then there is not an audience
there for us to monetise. That is really in essence what we are
complaining about. I think it goes further than that because,
in addition to these new 65 sites with video, what the BBC are
also proposing to do is to launch a map-based news service. This
is the real killer blow. They are doing it without reference to
further consultation, because apparently—and we do not understand
how this is able to go through—they are doing it within
the terms of their existing licence. It is a map-based news service
that allows the user to effectively personalise that content down
to their local postcode area, which competes directly with the
regional press both in print and online. You heard from Carolyn
this morning that we are essentially all saying that digital is
crucial to the success of local journalism. It is not a "nice
to have"; it is a "must have", and we are all going
as far as to say that the regional newspaper industry will not
survive without a successful digital future. Yet, once again,
we have an example of the BBC coming in with an enormous amount
of resource, an enormous amount of investment, that simply dwarfs
what anyone else is able to do. That will distort the market and
it will preclude us from investing. Therefore we are back to plurality
of voice and the role that we know these great brands, these great
institutions play in our community. They are honest, they are
apolitical, they are responsible and they are accurate sources
of news, and we should be very fearful about losing them.
Ms Rasaiah: Can I just stress
that that is not just a concern of Guardian Media Group and Trinity
Mirror. It is a concern of the entire regional newspaper industry,
from the big groups to the family-run titles. They all share the
same problems and the same concerns. It threatens all of them.
Ms Bailey: The point as well is
that our concern is not theoretical. It is about real jobs, real
businesses and real people.
Q72 Paul Farrelly: I can understand
the concerns. They need to be put very forcefully to the BBC,
as indeed the questions about their ultra-local TV service. The
reality for many of us, as Members of Parliament, around the country,
is that in terms of regional newspapers, one newspaper typically
in many areas has a monopoly and therefore sometimes it is very
difficult—and I am a journalist by background—to see
the best standards sometimes in journalism if there is a monopoly
supplier. So many of us welcome the presence of BBC radio and
independent radio as an alternative outlet. Indeed, some of us
have set up websites with public funding through Parliament to
be able to have an outlet for news that the papers not might not
choose to cover or choose to cover when it suits them. Why should
this, in terms of plurality for the consumer of access to local
news, not mean that actually the BBC's initiative is welcomed?
Ms Bailey: The point is that it
is a fallacy to think that we have monopolies in our markets if
you think about who we now compete with. The world is now multi-platform.
Consumers and advertisers readily move across platforms for their
sources of news and information. So on the one hand, we are competing
with Google and Right Move both for content and advertising, with
radio, with other websites. All sorts of plurality is there. What
I would say to you—and let us not overlook this—is
that the regional newspaper business is going through a fundamental
process of transformation to allow it to be able to compete successfully
in the future, and that is multi-media. It is a very difficult
transition for us to make and we are all doing the very best that
we can at it. The pressures that we have are both cyclical—the
current economic situation that we are facing—and structural,
which largely comes from digital. This year so far we have closed
44 local newspapers because we simply cannot find a way to sustain
them. They are simply not going to be profitable going forward.
This will just add to the tensions and the pressures in the market
and our ability to continue to invest in local journalism, where
we are going to have to invest online because that will be an
integral part of the future of local media. I think the important
thing is to think about what we are doing as local media, not
just local newspapers and therefore who the competition really
is here.
Q73 Paul Farrelly: Would any of your
concerns be lessened if, for example, the BBC were forced to give
a commitment that it would not simply aggregate local news stories
out of newspapers in the way that some of the online products
do already from other companies, or secondly, that they should,
as a local service, provide prominent links to websites of local
newspapers?
Ms Bailey: No, I think they should
not be doing this. We have heard this morning that the BBC has
lost sight of its strategy. It has lost sight of its purpose.
It is too big, too unwieldy, and it is using public money to aggressively
compete in areas where it simply does not need to be. All organisations
need parameters and they all need targets. Coming back to Worldwide—and
I have a lot of experience in dealing with Worldwide in my previous
company, IPC Media, where, as a magazine publisher, we competed
directly with BBC Worldwide as a magazine publisher. I also sat
on the Lord Burns Charter Review panel in 2004-05. The problem
we are seeing with the BBC right now is, in its quest to serve
all audiences, it is clearly without parameters as a result of
that. I would say to you that the management are out of control
and the Trust are not in control. We have ended up almost with
the worst of all worlds. If you think about what the Burns Committee
proposed, which was a board of directors made up of executives
and non-executives that very much complies with the Combined Code
and that sets the strategy, the performance, the day-to-day governance
issues, and then sitting behind that, to regulate, we have the
Public Service Broadcasting Commission. If you look at what we
are seeing right now, with the Trust and the board, clearly it
just is not working.
Q74 Paul Farrelly: I want to ask
about radio in a moment. Are you saying that, in terms of commercial
also, were you to try and enhance the websites of your regional
papers in the way the BBC is doing it, it simply would not be
commercially viable for you to do that?
Ms Bailey: What I am saying is
these are new businesses, they are embryonic businesses and they
are fragile. They need lots of nurturing. They need lots of development.
We carry approximately five videos on our site today. We are continuing
to address that. That will continue to grow but the BBC will immediately
come in with something that dwarfs our ability to do that because
they do not need a commercial return. We have to be able to generate
a commercial return to make money to stay alive—it is as
simple as that—and they do not, but it is not just the video.
We absolutely should not overlook this map-based news service
which is coming in underneath the radar, which is a real threat
to regional media.
Q75 Chairman: Can I just challenge
you on one point? You have talked about the lack of parameters,
the lack of boundaries. A lot of the evidence we had earlier this
morning was about how the BBC is getting into areas which have
no relation to programming, far removed from the core purpose.
Ofcom's PSB2 research shows that the type of public service broadcasting
that the viewers most value is local news. Local news has always
been absolutely core to what the BBC does. Arguably it is going
to become more important because ITV is getting out of it. Is
it not arguable that, if people want to access video content via
the Web rather than through scheduled television, the BBC needs
to adapt to that behaviour and needs to make available its local
news on the Web?
Ms Bailey: We cannot look at the
BBC just in isolation. We have to look in following that strategy
and allowing that to happen at the consequences on the rest of
the media market. I say again, we all love the BBC but would we
love it quite as much if it were all we had? That is a very real
prospect that we will be facing in regional media.
Ms Rasaiah: Also, I think it is
debatable that it has actually been core, the local news service
of the BBC to date. In fact, the BBC is being encouraged to go
into the regions and localities, almost to colonise those with
services.
The service that the BBC is offering is
not just local video. Let us not forget it is also news, sport,
entertainment, user-generated content, which is the most local
of things. The BBC describes it in terms of local, personalised
service, whether by postcode or mapping and so on. That is the
intention of the BBC, to go in there.
It is not the case in the past that the
BBC has been able to launch the equivalent of local and regional
newspapers in print. Why should it be allowed to do so online,
and why should it be allowed to do so using public funds?
Q76 Chairman: It is not launching
the equivalent of a newspaper. It is making available its video
local news online rather than simply on television.
Ms Rasaiah: If you actually look
at the service description, it is not only local news video online.
There are also huge swaths of user-generated content which is
local news supplied by local people; sport, which is also local
and regional news; entertainment, what is going on in the area,
which is also local and regional information; and also it will
be duplicating areas, for example, that local newspapers already
deal with in terms of news, sport, entertainment, local government
coverage for example. To answer your question in terms of why
should the BBC be allowed to do these things, it is not actually
offering anything new in those areas. In respect of local government
coverage for example, local and regional newspapers are already
developing services with local authorities, from webcams to questions
and answers over the online services. The BBC is not offering
new services. It is actually competing head-to-head with the services
already offered by newspapers.
Ms Bailey: It is not distinctive.
It is absolutely not distinctive.
Mr Vickers: You say they are currently
providing local television and local news. It is not as though
they are taking what they are currently doing and just releasing
it on a different medium. They are going out, spending £68
million of new money, hiring 300 new journalists. It is a completely
new strand, a new service. To take up one of the points that Mr
Farrelly made earlier on, he said they tried ultra-local video
and failed. This is just coming back through the back door, trying
to do something that they were not allowed to do before.
Q77 Chairman: It was not that they
were not allowed to do it. It was that they decided not to proceed
with it.
Mr Harrison: They decided not
to.
Q78 Chairman: I want to come back
to Sly's point. I have seen a demonstration of it and I agreed
with you. From your point of view, if I were sitting in your chair,
it is the map-based system which is really scary but, even with
the map-based system, I looked at stories around my constituency.
There were likely only to be probably two stories flagged within
a ten-mile radius of where I live. Two stories compared to the
number that appear in a local newspaper—there is no real
comparison. A local newspaper provides far greater depth of coverage
and a far bigger number of stories than anything that is going
to appear on the BBC site.
Ms Bailey: But are we really sitting
here and thinking, with £68 million and 300 journalists,
once we have the search parameters effectively at that level of
personalisation and that ball starts rolling, where that will
be in one, two or three years time? I do not sit here and think
that will be two stories at that point. I think this will be a
major plank in their strategy.
Q79 Chairman: You know the BBC has
given undertakings about not going down any closer?
Ms Bailey: But the users will
do that for them. Once you have a map-based news service, it will
happen. That is what makes it hyper-local.
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