Examination of Witness (Questions 254-259)
LORD CARTER
OF BARNES
CBE
10 DECEMBER 2008
Chairman: Good afternoon. This afternoon
is the concluding session of the Committee's inquiry into the
commercial operations of the BBC and we are extremely pleased
to welcome the new Minister for Broadcasting and Communications,
Lord Carter. However, the Committee also felt that it was an opportunity
to explore one or two other issues falling within the Minister's
brief, so we will commence with the session concentrating on BBC
Worldwide and the commercial operations, but then perhaps looking
to one or two other issues more generally, but to begin this afternoon
can I invite Paul Farrelly to start.
Q254 Paul Farrelly: Lord Carter,
we commenced the inquiry into BBC Worldwide in part because there
was a feeling in certain instances, not least the acquisition
of Lonely Planet, that BBC Worldwide had overstepped the mark.
These cries come from time to time, but there does have to be
a balance between revenue maximisation, does there not, and the
BBC not for ever and a day being the elephant in the room in its
mainstream or commercial operations, simply crowding out the legitimate
activities of the private sector? Could I just ask you first of
all, philosophically, what is the Government's view of the BBC
exploiting its intellectual property and where should the boundaries
to its activities lie?
Lord Carter of Barnes: You use,
I think, a very timely phrase in part of your question around
the exploitation of intellectual property. I think if you look
at the broadcasting industries generally—in fact if you
look at the creative industries, but we will keep it to broadcasting
for now—relatively recently, I would say even arguably within
the last two or three years, we have seen a significant turning
point where the exploitation of rights and the exploitation of
the intellectual property has become an ever more important part
of the business. This has been true for some time, for sure, but
as the world has gone more global and as more and more platforms
for distribution have gone to scale, the value in the rights,
the value in the exploitation of the intellectual property has
gone up and up, and up, and that is a really significant reality
for the entire sector, which I suspect we will come back to in
other questions. As it relates to your central philosophical question,
I am not sure I can speak for the entire Government on this question,
but my view of where the BBC is on this is that I think it is
on the horns of a dilemma because on the one hand we legitimately
want to maximise the returns, if you like, to the BBC Exchequer,
particularly for assets which have already been paid for by the
licence fee take, but on the other hand we do not want them to
go so far that it is market distorting or chills competition,
or chills innovation. So there is a degree of encouragement and
constraint, and that is quite a tricky wicket to play on. My own
view is that at a simplistic level it is not particularly helped
by being called BBC Worldwide, which is not just an issue of optics
or nomenclature. If you actually look at the anatomy of their
business, a lot of their business is not the exploitation of BBC-owned
properties. So if you ask the question in a slightly different
way, if I am allowed to do that, and say, "Do I think there
is a value to the UK creative industries and to the broadcasting
market in having a highly successful business which exploits the
rights from UK-originated content around the world, from public
service broadcasters in the broad, including the BBC?" I
absolutely do.
Q255 Mr Sanders: The executives of
BBC Worldwide have quite fairly said to us, "We have been
told to go out and do as much as possible for the British creative
industry and make as much return as possible, and we are doing
it and now we are being criticised for it." Do you think
that in order to try and resolve the horns of the dilemma on which
they are placed they should be given firmer guidelines? For instance,
should there be a principle that there must be a strong link between
the BBC's commercial activities and its own programming?
Lord Carter of Barnes: I do not
know is the honest answer to that. Take me a little further before
you go on with the questioning, if you will.
Q256 Paul Farrelly: Let me help you
with the Lonely Planet acquisition. It raised considerable disquiet
because here is the BBC not buying a small name which it could
exploit and put its programming behind, and launch magazines with,
but taking a really well-established brand name out there, which
clearly had competitors, putting its resources behind the Lonely
Planet brand, and there was considerable disquiet because the
BBC had not grown that brand. There was a perception that it may
have been paying dotcom boom-type prices with a business model
which is different for the BBC from other people, particularly
when finance is tight, which allowed it to buy that for a large
amount of money. Is that the sort of instance which would make
you feel uncomfortable where the BBC may have stepped over the
line?
Lord Carter of Barnes: I am sorry
if I restate the same answer to a different question, but I think
we legitimately have to try and do two things, but I suspect we
cannot do the two things with the same set of rules. We have to
have a necessary set of protections, Fair Trading guidelines,
Competition Rules, whatever else it may be, around the activities
of an organisation which is by its very nature distorting of the
market, which is the BBC. We decide and support the BBC for good
reasons, but we do that with the full recognition that it has
consequences and we want, where possible, to control the negative
consequences so that it does not stifle innovation and competition
in other areas. But at the same time I am instinctively uncomfortable
with taking an idea, which is rights exploitation of high quality
UK content, and starting from the premise of how do we constrain
it? I would rather start from the premise of how do we maximise
it? But how do we maximise it without having the negative effects
on the rest of the market? That is what I mean when I say I think
we are on the horns of a dilemma and it could be that because
of the shift in the structure of the market that dilemma is more
stark now than perhaps it has been for some time. In its current
form, I think in relation to some of the issues which you allude
to, and other people have alluded to, it is written very starkly,
but as a starter for 10 I do not think it is beyond the wit of
man for us to do both of those things, to have the protections
and also to have the maximisation. That is where our thinking
is at the moment.
Q257 Paul Farrelly: Just a final
question. On the issue of Lonely Planet, does the BBC's acquisition
of Lonely Planet, rather than using its own BBC name to do what
it is planning, leave you feeling that actually the BBC's judgment
is correct or not correct? Has it overstepped the line or not
overstepped the line? Are the concerns of the likes of Time
Out justified or not?
Lord Carter of Barnes: I am sure
if I was sitting inside Time Out I would feel passionately
that they were justified. I do not know enough about that particular
acquisition, or indeed frankly that particular market, to know
but as it relates to case by case acquisitions, I think you have
got to leave that to the management and the governing structures
they have got. What we have got to make sure we are happy with
is, are we happy with the overall construct? At the moment, all
aspects of the BBC have to deliver the BBC's public purposes and
at the moment BBC Worldwide is making a contribution to that.
What I think we are seeing at the moment is a kind of tension,
a conflict between those two. If you and I were having this conversation
in three or four years' time, the importance of rights exploitation
is only going in one direction, as you know as well as I do, if
not better. I think the question is, how do we set a set of rules
around transparency, transfer pricing, first look arrangements,
the commercial opportunities afforded to this entity in a way
which makes other players in the market feel that they are competing
fairly? I think if we can get to that we could have the necessary
protections and the opportunity of this organisation to maximise
its revenues and that, I think, could be good for everybody.
Paul Farrelly: Chairman, that neatly
moves on to the remaining questions, but I sympathise with the
management of BBC Worldwide, who would probably think, listening
to you, Lord Carter, "Well, thank you, Minister, you have
not helped us off the horns of that dilemma!"
Q258 Janet Anderson: Lord Carter,
you have talked about the need perhaps for two sets of rules and
the kind of dilemma where the BBC on the one hand wants to maximise
returns to the BBC Exchequer, I think you described it as, but
to avoid market distortion. Worldwide has exclusive first refusal
of BBC programming, which has led Pact and Fremantle to argue
that the true market value of BBC programmes may not be obtained.
Do you think the interests of taxpayers could be better served
by an open auction?
Lord Carter of Barnes: I think
first look obligations are relatively common practice across the
world and there are arguments on both sides as to whether a kind
of straightforward open auction or a first look—first look
still requires the owner of the first look benefit to bid, so
it does not necessarily have the effect of diminishing prices,
in fact there are many people who would argue that the kind of
notion of a favoured distributor means you have an institution
or an entity which understands how best to exploit. So I do not
necessarily accept the analysis which says that its existence
has the effect of depressing value, which is what I think is behind
your question.
Q259 Janet Anderson: But we do not
actually know how much they are paying?
Lord Carter of Barnes: You would
know better than I. I do not know what the level of transparency
is on price paid or disclosure obligations on the Internet.
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