BBC Commercial Operations - Culture, Media and Sport Committee Contents


Examination of Witnesses (Questions 80-89)

MR ANDREW HARRISON, MS SLY BAILEY, MR PAUL VICKERS AND MS SANTHA RASAIAH

4 NOVEMBER 2008

  Q80  Chairman: They have also said there will not be more than a few stories. They have actually said they will put a cap on the number of stories.

  Ms Rasaiah: Those limits do not actually work. If you look at the limits, yes, they are saying there is a cap but, first of all, there are all kinds of exceptions, whether it is the Welsh and English language services, whether it is the London service. The BBC will also be allowed to update stories constantly. There are also whole sections of the service which are outside those caps; for example, user-generated content, which is essentially news stories provided from the localities, exactly what local and regional newspapers are doing. Those are outside those caps. Also, of course, if you actually look at the way those caps are going to be regulated, it is retrospective, over a year. What kind of checks are there going to be to ensure that they are kept within the limit? There are all kinds of loopholes in terms of live streaming, emergencies, special events. We really do doubt that even those caps are going to be at all effective.

  Q81  Paul Farrelly: If we made a brave assumption that those journalists the BBC are recruiting for these new local services are not going to be chasing cats up trees or chip pan fires in small villages, is there an argument to say that actually competition drives quality and sets a challenge in terms of quality for the regions that they, like the national press, should rise to it?

  Ms Bailey: We are inundated with competition, quite frankly, online. We are absolutely inundated with competition.

  Q82  Alan Keen: We have had people sit in front of us who have said the BBC should not be allowed to have a website at all. They should stick to radio and TV. But they have produced it and it is a wonderful service. I have always looked at the local papers, and I still read them in my constituency but to go down to the shop and buy it, and it is static, that does not compare with the internet. Mirror Group have to move into that very seriously. How long do you think local papers can survive? They cannot survive for more than ten years, can they?

  Ms Bailey: They can survive in pursuing a multi-platform strategy where newspapers can then sit effectively alongside online and mobile. In our company we now publish over 300 websites and circa 150 newspapers. So look at the investment already. In your own constituency we have an award-winning online site, the website of the year in fact. This is a hugely important part of what we are doing, and we should not underestimate how important our ability to do this is in what is already a very competitive environment. We understand that, we live with that and that is the way of the world. What we are objecting to is this level of unfair competition, which will squash what we are attempting to do and therefore the future and the plurality of local media.

  Q83  Alan Keen: This is really interesting. We are here to represent our constituents. We want to take a major part in this debate. Give us a chance. Give us some advice. Without saying to the BBC, "You can't do it any more. We're going to regulate you. You can't have websites any more," tell us how. Do we tell them to do it badly instead of in an excellent way?

  Ms Bailey: I think it is back to purpose. It is back to intent. It is back to strategy. The point is in a multimedia world the BBC can literally roar around the world, it seems to me, as we have heard this morning, doing pretty much anything they want to. Yesterday through the Newspaper Society we launched a legal challenge to the Trust because we feel also, not just in terms of looking at the potential outcome but the process that they are going through is fundamentally flawed.

  Ms Rasaiah: Yes. First of all, the point that has been made before: on the one hand, you have the BBC Trust encouraging the BBC to extend these local services with taxpayers' money. On the other hand, it is supposed to be acting as the independent regulator that is going to determine whether there is a public value in, and the market impact of, the service.

  The Committee has been circulated the letters from the Newspaper Society's lawyers to the BBC Trust and Ofcom which are questioning the process. Information is being asked of the BBC which regional newspaper companies consider imperative that they have in order to assess its impact. That is not being given. Ofcom's market impact assessment is expected to look at the effect on the local markets—each individual local market—of the service. That is not being done. There has been unilateral change to the timetable, which prevents regional newspaper companies—and others interested—from actually considering the market impact assessment and the public value assessment before the BBC Trust's provisional finding is published, in order to be able to make comments on them, or to be able to comment on Ofcom's market impact assessment and make those points to Ofcom before they are taken into account by the BBC Trust. Finally, the point that has already been made really, that the BBC Trust should be taking care that there should be public confidence in the integrity of the Test and that it does actually conduct an objective Public Value Test.

  Q84  Chairman: You have also criticised Sir Michael Lyons for making public comments in support of the service before the Trust has completed its review.

  Ms Bailey: In a speech he made an astonishing attack. It was an absolutely astonishing attack from someone who is supposed to be regulating, not championing the BBC. He actually said, "Nobody can be satisfied with the quality of local news in most parts of the UK." It sounds to me as if his mind is already made up in terms of going through that process, and that the public value test is a sham.

  Mr Harrison: May I come back to Mr Farrelly's original question? You asked why almost from a licence fee perspective or from the public's perspective, the consumer perspective, should we not be pleased about this potential intervention because of the benefits of plurality. I think the case I would make from the commercial radio perspective is just to highlight the very real dangers that I think this could lead to from plurality, because I think it could lead directly to the closure of a number of radio stations which are designed to reinforce that plurality. Remember that local radio is quite heavily regulated. In each local area there are regulations around the provision of two local services plus the BBC. So in your constituency Signal in Stoke and there are a number of other services round about.

  Q85  Paul Farrelly: It is a great station, Signal.

  Mr Harrison: I am delighted to hear it. There are, I think, three reasons that this is very concerning to the commercial radio sector and I think are very germane to this debate. The first is the size and scale of the intervention. It has been talked about quite clearly and vociferously and elegantly from the newspaper perspective but it touches on something I said earlier on. Commercial radio is a small sector. The total turnover of commercial radio is smaller than Trinity Mirror Group. As a result, when you have an intervention of £68 million, £23 million ongoing, that is huge in scale compared to local radio.

  Q86  Paul Farrelly: It will be spread fairly thinly, will it not?

  Mr Harrison: It is £1 million across 60-plus different sites. To take the context, £23 million a year worth of investment is three times the market capitalisation of The Local Radio Company which is the biggest local radio company outside the major groups. The small local radio companies that service local communities are either part of regional newspaper groups, like Kent Messenger Group, like Tindle, like CN Group, which are small, self-standing, independent groups. This absolutely dwarfs the scale of investment those stations could make but it has two critical knock-on effects, which is where I think there is a real risk to ongoing plurality. The first is that the media base for radio in the UK has been worked out over the last few decades and exists in fairly close harmony. The BBC traditionally has been licensed to have national services, Radios One, Two, Three, Four and Five and so on. The commercial sector has only ever, by and large, been licensed on a small local basis. Traditionally BBC Local has targeted the over-fifties audience and left the under-fifties, which is the audience that is attractive to the commercial sector, pretty much alone in terms of the way the ecology has evolved. This proposal, very clearly, in the BBC's submission, is designed to tackle audiences under the age of 45. For the very first time BBC local radio's footprint will start to go much lower. Remember that the 65 services the BBC are proposing are based on their local radio footprint. It brings the audience much younger and it begins to offer a service directly designed to appeal to younger people, directly designed to take audiences to BBC websites as the initial portal rather than to the websites that we are trying to take our own listeners to and on which, as Sly has touched on, we depend for revenue. There is a real risk that the site and the scale and the audience distortion will threaten the viability of the fragile economy of local radio. The final point, however, which I think is critical is also around plurality. This is an extraordinary intervention in local markets to journalistic resource. All local radio stations, as part of their licence format, are committed to provide local news. They are required to be based in their local service area. They are required to employ local journalists covering local stories. All of a sudden you have a licence fee-funded intervention whereby up to ten stories a day can be covered with local video. That is an extraordinary number of stories. With 65 sites you are talking about 650 different stories.[131] Most local news, with the best will in the world—and we have talked about cats up trees and chip pan fires—ten stories is a different lead item on the news every hour between eight in the morning and six at night. That is every story that will ever have happen in a town covered with a local video link by the BBC, with cross-promotion from the radio station directing consumers to the website. In terms of a small local radio station's ability over time to both attract journalistic talent, train and develop that talent, and provide a competitive service to compete with the BBC on an ongoing basis, that will quite clearly be impossible.


  Q87 Paul Farrelly: Sly's point I understand. It drives eyeballs away from the growing website activities of the regional newspapers and by extension potentially away from traditional print form. Is your argument that it is driving eyeballs away from your websites or ears as well from your radio?

  Mr Harrison: I think both are true. Self-evidently, if you have this major investment in a new local media form, the BBC is going to be driving licence fee payers and consumers to want to interact with that site. Every minute they are interacting with that site is a lost opportunity for them to be consuming the local radio, particularly when a large part of the reason to listen in and tune into local radio is what is the latest news, what is it about school closures, what is the traffic situation, the very stuff that is going to be pumped through in real time on its website. So we will lose listeners and the same argument then follows as Sly articulated, around losing listeners means we will lose revenue but the longer-term impact in many ways worries me most, which is around the plurality and diversity of the journalistic base in a local market, in 60 local markets.[132] If you are an aspiring young journalist just out of college, it is pretty obvious: where are you going to apply for a job? Where are you going to want to work? Are you going to work for the organisation that has this guaranteed funding, the ability to cover ten new local stories a day in video and post them online. The opportunity for plurality and diversity of news coverage and journalistic excellence I think will be completely swamped by such a huge intervention in the marketplace so quickly, and particularly, of course, at the present time. The chances of the commercial sector doing anything to try and match this and replicate it right now is non-existent. It genuinely risks putting a large number of small local commercial radio stations out of business. It will have the complete opposite effect on plurality that I think is potentially an unintended consequence. One of the concepts that we have been trying to articulate with the Trust and with Ofcom as we have talked about this is considering the net public value that is the result of these proposals. Whether or not you agree there is public value at all, and clearly the newspaper groups have articulated their position, this is clearly a proposal where there is a tension between some potential public value on the one hand and some clear market impact on the other. This will be a difficult decision. We understand that, but the net public value that we would argue is going to be generated by this proposal is clearly very negative. If the BBC ends up spending a large amount of public money launching a new service that in the end reduces plurality in local areas, reduces journalistic competition, takes audiences away from local radio stations and deprives local radio stations of the opportunity to build nascent online businesses themselves, that net public value is severely detrimental to the overall plurality of the media ecology in the UK.


  Q88 Chairman: In local markets, do you accept there is any validity in the charge that newspapers have been pretty slow off the mark, and actually in large part the content available online is still pretty inadequate?

  Ms Bailey: Newspaper website of the year, 300 launches so far? No, I do not. Clearly, we do have to make a commercial return, so we are not able to enter markets in the same way that the BBC does because we have to make that commercial return, but I would say that that is absolutely false.

  Q89  Chairman: The assurances that the BBC have given that they have no interest in getting into the areas which generate your revenue, like classified advertising and dating and selling cars and advertising jobs, do not make it any better?

  Ms Bailey: It is a red herring because it is the eyeballs that generate the revenue and their particular focus will be news and sport, and those are absolutely the heartlands of regional media.

  Chairman: You have given us plenty to raise with the BBC in two weeks' time. Thank you very much.





131   Note by Witness: The BBC is proposing 65 sites in 60 areas. The 5 Welsh areas will have sites in both English and Welsh. Back

132   Note by Witness: The BBC is proposing 65 sites in 60 areas. The 5 Welsh areas will have sites in both English and Welsh. This explains the disparity with the "65 sites" figure quoted above. Back


 
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