Examination of Witnesses (Questions 160-167)
SIR MICHAEL
LYONS AND
MR MARK
THOMPSON
18 NOVEMBER 2008
Q160 Paul Farrelly: Very quickly,
how did the Trust satisfy itself that the price was fair and reasonable?
Let me give you an example. I had the misfortune years ago to
be the appointed the person advising the British Government in
1986 on the disposal of the National Bus Company. When the National
Bus Company negotiated disposals, we were tasked with providing
a letter to the Government along these lines: that the price was
fair and reasonable and we would make certain recommendations,
such as charges on properties, clawbacks on future sales and the
like. The Government mostly ignored that in its rush to privatise,
but the mechanism was there. What mechanism did you have in place
to satisfy yourself that the price was fair and reasonable?
Sir Michael Lyons: If you do not
mind, I am going to beg your indulgence to give you this in writing,
so that I can give you meticulously the process, exactly which
advices were used at which point. It was a detailed process over
some months—and I am happy to share that with you—but
I am confident that we took all the advice that we needed and
took a process of very careful deliberations with the Executive
Board and Worldwide before agreeing that this matter could go
ahead.
Mr Thompson: There was a due diligence
process, the shape of which was agreed with the BBC Trust, all
of which was open book to Trust and which involved—
Q161 Paul Farrelly: We must press
on. We are going to come to the management, but I am quite surprised,
given that you have only named three instances, that you cannot,
off-the-cuff, give me those salient details. Could I say as one
marker that the level of disclosure in the notes of BBC Worldwide
for an acquisition of this size is not the level of disclosure
that I would expect from a public listed company in a Super Class
1 or other acquisition document.
Sir Michael Lyons: Rather than
suggesting for a moment that you might not have a point there,
I can offer a willingness to have a side correspondence with you
which can be shared with Members of the Committee to test that
proposition about whether the levels of disclosure are less than
you would expect of a plc in this setting. If you have a point,
then that is something that the Trust will want to take on board.
Mr Thompson: I would not want
you to think that there was not an extensive due diligence process
with multiple independent studies. I am very happy right now to
take you through it if you like.
Paul Farrelly: We will move on to the
management.
Chairman: Sir Michael's train is going
to have to wait a very long time if we get into that, so let us
go to Helen Southworth.
Q162 Helen Southworth: Could I move
on to online video services. We have had some extensive concerns
through the local newspaper industry that there is an already
crowded market and that the BBC is intending to invest to such
a degree in local online services that they have dwarfed the budgets
that the local press has to maintain their own websites and that
this would have an effect of forcing many of them out of business.
Can you explain to us what there is that is different about what
the BBC bring, and also what you are going to do about making
sure that you are absolutely and scrupulously fair.
Sir Michael Lyons: Let me address
the second of those issues and ask Mark to go into the nature
of the proposition. The BBC Trust has developed a public value
test which is to test all new service proposals for the BBC. It
is in two parts. One part is an examination of the likely public
benefit of the new service and its second part is a market impact
assessment, recognising that it is likely that any new surplus
will have an impact on competitors or others who invested in the
area. That is conducted on our behalf by Ofcom although we commission
it. That is exactly the model that we have applied to this proposition,
the local video proposition, which itself is an attempt to respond
to a gap that the Trust identified in some of its early work—and
it is quite a strong finding—of an appetite for more local
material from the BBC. Coming back to the public value test, that
test has been running for five months now. At our meeting in Cardiff
on Thursday of this week, we will have the provisional conclusions
of that process and they will be, in keeping with all of our previous
PVTs, put into the public domain for a second round of consultation
before making a final decision. These issues are being weighed.
I absolutely understand that local newspapers are anxious—and
this is a long-term issue and it has been aggravated by current
market conditions—about how they will survive with reduced
advertising income, particularly given the impact of commercial
websites upon them. I absolutely understand the concern and that
is exactly what we are balancing: Would there be a net public
gain from the new BBC service that outweighed any market impact
or not?
Mr Thompson: I am sure you know,
but for the avoidance of doubt let me say, this is not part of
BBC Worldwide's activities; this is a proposal for the use of
the licence fee to provide an enhanced local service for licence
payers in the UK without advertising or any other form of monetisation.
It is really important that the service is distinctive. What does
that mean? By far the biggest part of this is going to be about
enhanced provision of news. We have given an undertaking which
if the service is to go ahead I am sure we will be tested on by
everyone, by the Trust but also by the outside world, that at
least 20% of that news should be specifically devoted to local
politics and local public policy. This is an opportunity potentially
for councillors, for other interest groups, for community leaders,
to get access to the public in a way which I have to say I do
not believe happens in my experience of other local sites or the
plans of other local sites that I see. The intention—rather
in the way that BBC local radio currently in England does pursue
a different agenda and has a different relationship with its audience
from commercial local radio—is that our local websites,
which already exist, also could do a different job with this additional
video content. However, on behalf of BBC management I recognise
that this proposal, which is over four years old—indeed,
it predates my arrival as Director General—has become a
much more focused, much more modest proposal than that which was
originally envisaged, which was ultra local television and so
forth. This is an enhancement of existing local websites around
content which I think most people would regard as being punctiliously
public service, and, in my view, at least distinctive from what
else is available. However, I think people would recognise that
the market context has changed enormously over the last four years
and particularly in recent months. I think one of the benefits
of the process that we have in place is that the BBC Trust, by
commissioning a Market Impact Assessment from Ofcom, can make
a decision which reflects the understandable concerns of other
media players as well as the potential for public benefit from
the BBC's proposals. Like everyone else, I will wait to see what
they come up with. Many people, for example, would regard better
access to local democracy as a good thing, but weighing these
potential benefits against the potential disbenefit of impact
on other media players is precisely what the process is intended
to achieve.
Sir Michael Lyons: And it will
all be public—all of the underpinning evidence.
Q163 Chairman: Sir Michael, you,
as Chairman of the Trust, will be conducting a public value test
and deciding whether or not the BBC should go ahead with these
proposals, You will be aware that your comments to the Broadcasting
Press Guild lunch, that "nobody can be satisfied with the
quality of local news in most parts of the UK" have been
strongly contested by the local newspaper industry, but more to
the point they see that as you having made up your mind before
you have even conducted the test.
Sir Michael Lyons: That was a
slightly compressed version of my comments. In fact I have the
text of what I said here. It might be useful if I read that to
you. Ben Fenton from the Financial Times, who was certainly
here earlier on and may still be here, asked, "BBC Local.
I mean, you know it is a very real threat to the newspaper industry
in this country and it is not the fault of the BBC but the BBC's
activities in working on local video, which have yet to actually
have any effect, will not make that better." My response
was: "It is a real issue. Absolutely, a real issue. That
is why we have the public value test process, so that this is
not just, you know, it is ... ." I am sorry, reading this
verbatim just shows that this was not the most nuanced answer.
But let me read it verbatim, as I have started. " ... . you
know, there is very clear evidence of the Trust having established
machinery which really does test the underlying issues. Let's
just put the two sides of the book in front of us. There is nobody
who can be satisfied with the quality of local news in most parts
of the United Kingdom. The local press has nothing like the strength
that it would want to have. In the city in which I know well it
is not the same proposition that it was 15 years ago. So, you
know, that is not a steady state situation. Would the BBC's intervention
make it better or worse? That is exactly the issue to be explored
and challenged." I was seeking to say there—maybe less
expertly than I would have hoped for—that the PVT will take
account of these issues, was designed to take account of these
issues, but I was equally saying that the newspapers themselves
are clear that they are facing difficult times and that that has
been a trend over some period, not just one that has emerged in
the recent past. Only a week after Sly Bailey came and gave evidence
to you, there was, at the Society of Editors' Conference, a very
robust response to her from one of her former colleagues, acknowledging
publicly the difficulties of regional newspapers and, indeed,
challenging her that they need to do better for their customers.
This is a public debate. It is important that we do not shrink
from that.
Q164 Janet Anderson: Sir Michael,
you have acknowledged that local newspapers are facing a difficult
time and indeed they are. ITV also has its own service, itv.com.
Do you not accept that if you launch this service you are going
to put them in an even more difficult position than they are in
now?
Sir Michael Lyons: I do not think
there is much to add to my comments really. I absolutely acknowledge
those differences and I have underlined that they will be balanced
in the PVT process and that is what it is designed to do. The
longer term issue, of course, with all these issues of market
impact that you have to balance, is that the primary responsibility
of the BBC is to respond to the needs and interests of its licence
fee payers. It must take account of those impacts and make sure
that the gain really outweighs them, but there are always likely
to be some market impacts and the thing to judge, particularly
in a dynamic situation, is whether we are facing a temporary problem
that can be righted by those organisations or are instead facing
a fundamental change in the way that news and advertising are
delivered locally. These are issues to be debated. I do not have
the final wisdom on that. That is why we have this very careful
measured process, which is completely transparent, which will
balance the effects, and all of its results will be open for public
scrutiny.
Q165 Janet Anderson: I think most
of us would accept that we are facing a fundamental change in
the way people access local news. Most of us do it at least some
of the time online. But if you conclude that by going ahead with
this service you are going to make things more difficult for these
people and if you also conclude that you are not going to provide
something that is not already provided, will you then not go ahead?
Sir Michael Lyons: If we were
to conclude that the market impact was so severe that it was stronger
than the public value gain, then, unequivocally, we would not
go ahead. Unequivocally, we would not go ahead.
Q166 Mr Evans: Finally, how important
do you consider it that the competition that Janet has just been
talking about is not in receipt of any public money whatsoever—local
newspapers, ITV—and the BBC is in receipt of huge sums of
public money and that therefore this is just a distortion of competition?
Sir Michael Lyons: Mr Evans, absolutely
that is why we have to do the test. It would not be a test that
I would have to apply if I were the Chairman of Trinity Mirror.
That is a commercial organisation competing and, therefore, other
than observing the competition requirements that we laid down
by regulation, they would not have to consider these issues. The
BBC is in a different position and quite properly has been charged
under the new Charter. It is a duty attached to the Trust to reflect
on market impact and balance it against expected public gain and
that is what we are doing.
Mr Thompson: This issue of market
impact in relation to BBC Local is incredibly important and the
process is dealing with that. I want to say more broadly, though,
that the BBC has been in a number of different ways investing
outside London, investing in regional news, thinking hard about
local services. I talk to my colleagues frequently in regional
and local newspapers and also in ITV and commercial radio, and
in relation to our services in Scotland, Wales and Northern Ireland
and our regional television in England and our website, I think
we generally do a good job. This at least means that the public
during this period do have access to, in my view, good news and
current affairs and debate about local issues and about what is
going on in their part of the world. The reason it is an interesting
decision for the Trust to have to make is that there are very
powerful benefits out there which are paid for by the licence
fee and which we know that audiences are very grateful for. Indeed,
when you ask audiences what would they most like the BBC to do
more of, their biggest concerns are about improving local services.
That is the number one in the list pretty much.
Sir Michael Lyons: My only reason
to make any comments at that lunch, apart from underlining the
robustness of the BBC process, was also to acknowledge that the
BBC had not gone into this because it had nothing else to do.
It was responding to a clear public demand for more local material.
I think that challenge remains. Whatever the outcome of the BBC,
that challenge remains, and arguably not for the BBC alone.
Mr Thompson: It is not a new debate.
In the 1920s the local and regional newspapers ran a successful
campaign to persuade the BBC not to broadcast any news before
seven o'clock, so that the evening papers could be sold before
you got the news on the radio. So we have been here before.
Q167 Chairman: We have kept you for
some time. Thank you for your patience.
Sir Michael Lyons: I will take
your good wishes to the Welsh Assembly.
Chairman: Indeed.
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