UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be
published as HC 945-i
House of COMMONS
MINUTES OF EVIDENCE
TAKEN BEFORE
CULTURE, MEDIA AND SPORT COMMITTEE
BBC ANNUAL REPORT FOR 2008-09
Thursday 16 July 2009
SIR MICHAEL LYONS, MR MARK THOMPSON and MS ZARIN
PATEL
Evidence heard in Public Questions 1 - 134
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Oral Evidence
Taken before the Culture, Media and Sport Committee
on Thursday 16 July 2009
Members present
Mr John Whittingdale, in the Chair
Mr Peter Ainsworth
Janet Anderson
Philip Davies
Paul Farrelly
Mr Tom Watson
________________
Witnesses: Sir Michael Lyons, Chairman, BBC Trust,
Mr Mark Thompson, Director General,
BBC, and Ms Zarin Patel, Director of
Finance, BBC, gave evidence.
Q1 Chairman: Good morning. This is the Committee's annual session in which we take evidence
on the BBC's annual report and accounts for the previous financial year, and I
would like to welcome this morning the Chairman of the BBC Trust, Sir Michael
Lyons, the Director General of the BBC, Mark Thompson, and the Director of
Finance, Zarin Patel. Perhaps I could
start. There are plenty of people at
the BBC that do not feel it is a well-led organisation. Do you agree?
Sir Michael Lyons: I think you are quoting from the comments of
the Secretary of State.
Q2 Chairman: Indeed.
Sir Michael Lyons: Of course, I have no way of knowing how wide
a survey he has undertaken to reach that view.
He was making that comment in the context of the line taken by the BBC
Trust in particular, a view shared by the Director General, about
top-slicing. All I can say is that in
meeting many BBC staff I have yet to be approached by anyone who has any
reservations at all about the line on top-slicing. Are there, in an organisation that employs many thousands of
people, lots of different views? Yes,
and absolutely that is a healthy state of affairs. Is there a seething discontent?
I see no evidence of it but let me ask the Director General to give you
his views. He is much closer.
Mr Thompson: As I said a couple of days ago, I have seen
absolutely no evidence at all of any disunity in the BBC on the issue that I
think the Secretary of State was mainly referring to, which was the issue of
top-slicing. On the contrary, I have
had emails and comments, frankly, messages of support from BBC staff at every
level. I think there is a great deal of
unity in the organisation, both about the mission of the BBC, its public
service mission, but also on this issue of unitary receipt of the licence
fee. I do not have to tell you that the
BBC is a very large, disputatious organisation with many views on many
different topics and there are certainly things that happen in the BBC where
there is a lively internal debate, but in terms of belief in the values of the
BBC, its mission, its future but also the importance of the licence fee in
delivering the best services to the public, I think there is a great deal of
unity.
Q3 Chairman: You are right: the Secretary of State
identified the position that you have taken with regard to the proposals to use
part of the licence fee for alternative public service broadcasting
services. He described that as
"wrong-headed and ultimately self-defeating".
It is a policy of government. Do
you think it is appropriate that you, as Chairman of the Trust, should be
questioning what the Government wishes to do with the licence fee?
Sir Michael Lyons: I think this is the point in question. It is whether it is yet the policy of the
Government. The discussions that we had
with the Secretary of State questioned whether, in the closing days of the
completion of Digital Britain, the Government's position had moved from one of
regarding top-slicing as one of the options to be considered. We were trying to explore whether they had
moved to a position of it being their preferred option, and making the point
that if it was their preferred option this was no small matter. It is a matter potentially of constitutional
significance to the BBC and should be the subject of consultation. That point was essentially conceded in the
final stages of the drafting of Digital Britain when the Government agreed to
consultation on this matter. In the
context of that consultation I think it is entirely appropriate for the BBC
Trust to make it clear, as it had done for the preceding year, that it believed
that top-slicing was not in the interests of licence fee payers. I will not rehearse those arguments at this
point because you might want me to come on to them in later questioning, and I
have absolutely no discomfort about that, but let me underline that it is not
just the view of the BBC Chairman. What
you have in our statement is the view of the entire BBC Trust.
Mr Thompson: Chairman, if I can just say, the Secretary of
State went on to BBC Radio 5 Live that afternoon and he said there that he had
not made up his mind on the issue, that he thought it was very healthy to
debate the issue, that nothing that he had said in the Financial Times should be seen as an attack on the BBC nor just a
distillation of his views, so it is by no means clear from his remarks on 5
Live --- he seems to welcome the debate.
Q4 Chairman: But do you accept that the setting of the
licence fee and the use to which the licence fee is put is a matter for
Parliament and not for the BBC?
Sir Michael Lyons: Absolutely.
The setting of the licence fee is a matter for Parliament, and indeed
the use to which it is put. However, it
is a matter of some public moment, I think, if, after 50 years of the licence
fee having been collected solely on the premise that it is to fund the BBC and
nothing else, that any change in that is a matter that the public need to be
very clear about the pros and cons of and the potential risks that might flow
from it. If I can just finish this
point, in the creation of the Trust - it is not something that I have brought
to the situation - the terms explicitly used in the charter are that the Trust
should be the guardians of the licence fee.
How could it be inappropriate in that role, as the voice of licence fee
payers, that we would not seek to make it clear that there could be some very
serious implications of top-slicing?
Q5 Chairman: With respect, what the charter actually says
is that the Trust is the guardian of the licence fee revenue and the public
interest in the BBC. That means that
you are the guardian of how the licence fee is used to support the activities
of the BBC. It does not say that you
are the guardian of the licence fee in totality.
Sir Michael Lyons: I can see how you interpret it that way,
Chairman. For 50 years the licence fee
and the BBC have been indivisible and I can only say that it seems to me that
that was drafted in the context of 50 years of history of the licence fee being
used entirely for the BBC, but I take your point.
Q6 Chairman: Firstly, that is not the case. The BBC licence fee is used for other purposes. For instance, it is supporting the digital
switchover help scheme. The BBC also
uses licence fee money, for instance, to support S4C, so it is not the case
that all the money has always been spent by the BBC. Even so, if Parliament decides that it is appropriate to use
licence fee money for other purposes then that is a matter for Parliament and
there is nothing in the charter which says that you should oppose that.
Sir Michael Lyons: Chairman, we have established unequivocally
that Parliament has the power to decide and if it did decides I should not seek
in any way to do anything other than follow what Parliament has decided, but we
are in a period of debate. Are you
suggesting that, feeling strongly about this matter, the BBC Trust should not
voice its concerns? That would be an
extraordinary situation.
Q7 Chairman: Let me give you another example. When Parliament debated whether or not there
should be an increase in the licence fee for this year you went on the Today programme essentially to oppose
that.
Sir Michael Lyons: No, not at all. If you go back to my comments you will see me very clearly
acknowledging that this was a matter for Parliament, acknowledging very clearly
that there was proper debate about the size of the licence fee and about the
search for efficiencies in the BBC, but then going on to say that the danger,
the only point that I was raising there, of moving from the current five-year
settlement, which is part of the constitutional arrangements which protect the
independence of the BBC, to a year-by-year debate would mean perpetual
discussion on the funding of the BBC which almost inevitably could lead to
erosion of the independence of the BBC, which we know from all of our work -
again, back to licence fee payers - is right at the top of the public's
appreciation of the BBC as it stands at the moment.
Q8 Chairman: You say you were not opposing it. You made a speech saying, "Tomorrow
Parliament debates a proposal to freeze the licence fee. That is a recipe for curbing the editorial
independence of the BBC". That sounds
like opposition to me.
Sir Michael Lyons: In the context of moving from a five-year
settlement, which as you go further into that you will see very clearly
explained, to a year-by-year unpicking of the licence fee. That was the only principle and I have
repeated it on a number of occasions, including in conversations with the
Leader of the Opposition.
Q9 Chairman: Are you concerned that the Trust appears to
have arrived at a position where it is in conflict, quite serious conflict,
with both the Government and the official Opposition?
Sir Michael Lyons: I do not know that I do see that
situation. Indeed, one of the
interesting aspects of the debate about top-slicing is that the official
spokesman of the Opposition seems to be making increasingly strong statements
against top-slicing and in favour of the licence fee remaining entirely for the
BBC, so I do not see opposition on that principle. There will be different views on different issues. Do I feel that the Trust, which is charged
under the charter with more clearly speaking for licence fee payers, should
keep quiet when it believes that licence fee payers' interests are at
risk? No, I do not think it should, and
I am absolutely unashamed about that and if it means finding myself out of
favour with a minister from time to time, well, unfortunately, that is the
price of the job.
Mr Thompson: It is worth saying on top-slicing that a
number of Opposition politicians --- the Liberal Democrats have said they are
against top-slicing, amongst your own party who are against top-slicing Jeremy
Hunt, Ed Vaizey.
Q10 Chairman: I was not necessarily just referring to
top-slicing. You have attacked the
Opposition for putting down a motion simply suggesting the licence fee should
not go up. You have dismissed the
Opposition's complaints about the continued appearance of Alan Sugar on your
programmes.
Sir Michael Lyons: Can we come back to both of those, Chairman,
because there is a danger that your characterisation of those will go on the
record and you will forgive me for feeling that I need to challenge you on both
of those. I did not attack the
Opposition for seeking to question either the size of the BBC or value for
money within it. That is absolutely the
prerogative of not only the Opposition but indeed Parliament as a whole, and,
in the case of the Alan Sugar situation, that is a matter where there is an
official complaint from Jeremy Hunt which is currently being considered by the
BBC Trust, so any suggestion that that has been rejected by the BBC Trust would
not be well founded.
Q11 Chairman: But so far you have made it pretty clear that
you do not believe there is any difficulty in the BBC -----
Sir Michael Lyons: Chairman, I have made no such statement. It is important to distinguish between our
roles. I know you will want to do that
later on.
Q12 Chairman: I am keen that we should have as much
distinction as possible.
Mr Thompson: Just to be clear, Chairman, in my role as
Editor-in-Chief of the BBC I have reached a conclusion that, given that certain
strict conditions are met, I do not believe it is inconsistent for Alan Sugar
to continue to be the presenter of The
Apprentice in the present circumstances.
In conversation with Jeremy Hunt, the Shadow Culture Secretary, I said
to him that if he remains, as he clearly was, unhappy with that decision he
should take the opportunity to make a formal complaint to the BBC Trust. He has done that and the Trust are currently
considering that.
Q13 Philip Davies: Sir Michael, you come here each year and tell
us how you are the champion of the licence fee payer, but do you not recognise
that you are getting an increasing reputation for being not somebody who
represents the licence fee payer but somebody who represents the BBC itself? In a recent report we described you as an
apologist for the BBC and you wrote to the Committee to say that you were
unhappy with that description. On
reflection, I think you were right to disagree with that description of you
because I think it was far too moderate and kind, and some of the words I have
heard you described as are "cheerleader", " a lickspittle for the BBC". Are you not worried that that is the
reputation that you are getting?
Sir Michael Lyons: I certainly do not welcome terms like that
and I am sure that, given time, you can come up with some even more exciting
descriptors. The heart of this job is
sometimes misunderstood, including by very eminent people who played a part in
the discussions which led to the creation of the BBC Trust. The BBC Trust is not some external
regulator. If you had set that up as
the benchmark, and I have said this from the moment that I took this role on,
you would find it very difficult to understand some of the behaviours and
decisions reached by the BBC Trust. It
is instead the sovereign body - and again I go back to the charter - of the
BBC. All of the property rights and the
employment responsibilities of the BBC eventually are rooted in the Trust, so
it is absolutely unequivocally part of the BBC, but the Board is charged, and I
have said it publicly, not unlike boards of many other organisations, with
trying to ensure that the management are firmly focused on the interests of the
shareholders and in this case the shareholders are licence fee payers. The distinction of the Trust, distinct in
two respects, is first that it is given by Parliament some self-regulatory
powers within the BBC, and it needs to be very clear that it undertakes those
and that it does it in an independent-minded fashion. We have established special mechanisms to do that. I have lost the train of my thought. Let me stop because my answer is too long
anyway.
Q14 Philip Davies: Hopefully you will acknowledge that you are
supposed to be operationally independent of the BBC and yet you wrote an
article for The Independent on 17
April where you wrote within it that the BBC Trust is there to strengthen the
BBC, which I am not entirely sure is accurate, and you also went on to say that
you are there to defend the editorial decisions that it takes. Do you really think it is an appropriate
role for the BBC Trust to be there to defend the editorial decisions of the
BBC? Is it not there to hold the BBC to
account rather than to be a defender of the editorial decisions it takes?
Sir Michael Lyons: Can we take those a step at a time because
firstly I do not recognise "to defend the editorial decisions".
Q15 Philip Davies: It says here in the article, "not least so
that he can defend the editorial decisions it takes". Those are not my words; they are your words.
Sir Michael Lyons: I think if you just go into context, but,
please, if you would like to show me them I will make sure that I make no
mistakes in this, my understanding of what I said there was that one of the
jobs of the Trust is to defend the freedom of the Director General to make the
necessary editorial decisions, not to second-guess him, and to avoid the
situation where he comes under pressure from other quarters. You see this very clearly illustrated in the
action the Trust took over the Gaza appeal issue, a matter of very considerable
public controversy, where the Trust was, firstly, very clear that it should
speak up when there was the danger of inappropriate political pressure being
applied, but, secondly, in reaching a decision about whether the Director
General had made the right decision, decided to focus our attentions on the
process by which he had made decisions and that this was a reasonable decision
to take rather than to second-guess that editorial decision.
Q16 Philip Davies: You go on in this article to say that the
Trust's job is to help the BBC chart a course through this and ensure that "we"
are scrupulously careful about standards of accuracy and impartiality - not
"they", "we". Do you not think that all
of this adds up to the fact that you are not there to hold the BBC to
account? You come here as a double
act. You come here agreeing with each
other ad nauseam. That is not a position of
responsibility. You are two peas in the
same pod, are you not?
Sir Michael Lyons: No, we are not, and, listening carefully to
the answers that we give to you, you will be able to tell very clearly the
distinction for us. Can I come back
because I do think there is a danger that you, like others, have set up a false
hypothesis here? The Trust is not an
external regulator. It is the governing
body of the BBC. That is why I am here
at the same time as Mark Thompson. If
that were not the case you would see us on completely separate occasions. Do I use the wrong term when I talk of "we"
to describe our different roles within the BBC? I do not believe I do, but if you persist in testing me against a
different proposition then I am very likely to fail.
Q17 Philip Davies: Can I finally, on this bit, Chairman, put a
point that you made during the debate on the freezing of the licence fee, which
I thought was a very pertinent one? Sir
Michael, you repeated it again today, that you thought that annual reviews of
the licence fee would upset the independence of the BBC because it would be in
the political arena, and that five-year settlements protect the independence of
the BBC. Does that mean in the year
before the five-year settlement that the BBC is politically influenced?
Sir Michael Lyons: No, I do not think it is. There is always a risk, is there not, but I
think there are two points. The point
that I seek to focus on every time I come back to this is that there are
essentially two mechanisms that historically we have adopted in this country
and have been recognised and valued by successive governments that are the
hallmarks of why the BBC is seen, not only in the United Kingdom but throughout
the world, as independent of government, and those are, one, the charter. We revisit it every ten years to make sure
that the remit given to the BBC by Parliament is refreshed and renewed, but
also, on the five-year settlement, not to avoid the situation where from time
to time Parliament considers how big the licence fee should be and how much
resource the BBC should have but to avoid a situation where, month by month,
year by year, that discussion is going on all of the time and would inevitably
be the opportunity for those who had a mind to it to seek to influence the BBC.
Q18 Philip Davies: But surely one or the other must be the
case. Either the BBC is politically
influenced in the year before the five-year settlement because that is the
nature of what happens before the settlement is made, or there is no risk of
the BBC being politically influenced if there were annual settlements. You cannot have it both ways. You cannot say that it would be politically
influenced or there would be a risk to its independence on annual reviews of
the licence fee if there is none of that going on in the year before a
five-year settlement.
Sir Michael Lyons: I am not the architect of these arrangements,
of course; they have existed for many years, but let me indicate how I have
interpreted the importance of those debates over the years. It is one thing every five years for there
to be an open and public discussion about the licence fee for the following
five years. Everybody is put on alert
that that discussion is taking place.
The official Opposition have a clear knowledge that that is taking place
and therefore an opportunity to watch and scrutinise what ministers are doing
at that time. If you move from that to
annual rounds of budgeting I think we might all agree that that would be
effectively perpetual discussion about funding, just like we have had perpetual
discussion about public service broadcasting over the last two years. The problem with that is that discussions
take place that people are not aware of.
I think there is a profound difference between a discussion once every
five years on an open basis and a discussion annually which effectively goes
into perpetual discussion.
Q19 Philip Davies: But why should we not have a continual debate
about the BBC and the licence fee? Why
do you want to close down the debate for five years at a time?
Sir Michael Lyons: I do not think we are short of public debate
about the way licence fee monies are used by the BBC, but I am, of course,
referring to a different situation in terms of the influence that ministers
might bring to bear and we might have different views on this.
Mr Thompson: There are some international examples of
annual debate and annual setting of fees for public service broadcasters. The setting of the fee for the Canadian
Broadcasting Corporation, CBC, is an example of that, and if you look at the Canadian
example I think it has a debilitating effect on the public broadcaster and has
over time undermined the independence and the confidence of that public
broadcaster.
Q20 Chairman: Can we now have a look at some of the
specific provisions within the annual report?
In terms of the BBC's success in serving its audiences, you attach
enormous importance to reach and you say that you are exceeding target in that
93% of the population of adults enjoy some BBC service each week, and that, of
course, means that 7% do not ever use anything from the BBC, but equally, if
you go further down, when we get to television the report shows that 15% of the
population does not watch any BBC television service. Are you concerned about that?
Sir Michael Lyons: Can we get our definitions absolutely right
because, again, I think this is important?
The reach figures that we use are 15 minutes' usage in a week, so it
would not be right to say that we know that the 7%, in the case of all BBC
services, never use BBC services, and that would be a dangerous thing to suggest,
but what we do know is that they did not use it for 15 minutes or more in that
week period looked at.
Q21 Chairman: There are other measures you could use which
might give you that information.
Sir Michael Lyons: I accept that there is a case, and indeed I
think the BBC is making progress on this, in seeking to get the fullest
possible understanding of the use of BBC services and the value the public
places upon them. Reach is a good
figure to use as part of this equation; it is not the whole story but it is a
good figure to use because of the Trust's absolutely unequivocal view that if
you raise a universal charge in the form of a licence fee then it is a direct
obligation for the BBC to show that it demonstrates value to all fee payers,
and so it is the right indicator in that respect. It is, of course, part of a changed arrangement for monitoring
the performance of the BBC, the RQIV framework itself being evolved over time,
which is an attempt to move away from a history of focusing solely on audience
share, which tended to concentrate on the competition between broadcasters, and
to focus instead on audiences, how many of them use BBC services, their
appreciation of the quality of the services, and particularly to bring into
bring into that equation the issue of value for money. This is not the end state but a step on the
journey of a much broader evaluation of what the BBC does and the value that it
gives to licence fee payers.
Mr Thompson: If I can raise two very brief additional
points, firstly, and we are very happy to show this to the Committee, we have
developed a new way of looking at media usage across the platform - television,
radio, the web and mobile, and although we have kept to the same methodologies
in the annual report, and rightly so, we think the 93% reach figure understates
usage of the BBC. We think the truer
figure is about 98% of the UK population of weekly reach. The important thing to say about reach is
that it does not replace other measures of usage entirely, like, for example,
share, but we absolutely, as Michael mentioned, see reach alongside quality and
the public's perceptions of quality of the BBC. If you turn to page 13 of the annual report you will see a couple
of important measures. Those who give
the BBC the highest score for quality, eight, nine or ten out of ten, that
number has gone up over the year. For
those who give us high scores for producing and delivering original and
different programming, distinctive programming, it has also gone up
significantly over the year. Those who
score us most lowly for quality, a score of four out of ten or below, which was
13% last year, have gone down. The
quality measures are definitely heading in the right direction.
Q22 Chairman: The movement is small as you would expect.
Mr Thompson: I would accept that these may seem fairly
subtle but we are talking about movement over a vast number of people, over 26
million households in this country.
Believe me, statistically these are significant shifts, though I
absolutely would be the first person to accept, as the Trust have said, the
movement is welcome. Would we like to
see it go further? Yes, we would.
Q23 Chairman: You say that you are giving greater emphasis
to reach but you also said that does not replace share and it should be seen
alongside that. In actual fact, it does
replace share since in your report in 2006-07 you gave a figure for percentage
of hours of viewing or listening for each BBC television and radio service and
indeed comparison figures for other broadcasters. Last year that was reduced to two brief share tables and this
year there are no share tables in the report at all.
Sir Michael Lyons: Whatever the BBC uses to look at, I would
expect them to take the fullest possible perspective in trying to understand
the adequacy with which they are serving audiences. As far as the Trust is concerned, this report shows effectively
the dashboard by which we judge the BBC.
It is developing but we are absolutely clear that reach, quality, impact
and value are much more important indicators in terms of audience satisfaction
than share.
Q24 Chairman: So you will not be publishing share figures
in the future?
Sir Michael Lyons: I do not think they are likely to play a part
in the Trust's judgment.
Mr Thompson: There is absolutely no secret and we are very
happy to share all our share figures with you any time you want. The story of share is one of a fairly high
level of stability, with small declines in television in BBC1 and 2, increases
in share for our digital television channels, a slight increase in share of BBC
radio, a significant increase in usage of BBC.co.uk weekly users up by a third
year on year and a doubling of the number of people who use the BBC iPlayer
over the year.
Q25 Janet Anderson: I wonder if I could ask you about the licence
fee spend in the nations and regions which did increase significantly in
2007-08 but decreased by £40 million in 2008-09. I wondered if you would like to tell us why that was?
Sir Michael Lyons: The explanation is that this is work in progress. On behalf of the Trust, let me say that this
is a year in which we have set some new and very demanding targets to be
achieved by 2016, in terms of 50% of all our network output to be produced out
of London with new targets set for the amount to be achieved in Scotland, Wales
and Northern Ireland. What we see here
is the progress already made in changes, although inevitably as you start to
move things around you get some perverse results if at the same time you are
looking for efficiency savings. In
terms of where we are going to, I am very clear on the targets that have been
set and they are demanding.
Mr Thompson: If I take you to page 41 in the annual
report, what is happening is that the efficiency programme in the BBC is
reducing some of the absolute numbers being spent on services. As we divert money for example to pay for
the analogue to digital television switchover, we are still delivering I
believe high quality and indeed the public tell us that, but we are squeezing
the money. Some of the absolute numbers
have gone down across the board. On
page 41 you will see that the percentages that we are spending have generally
been rising. For example, the total spend
in television in the nations and regions which was 32.6 in 2007-08 in 2008-09
had risen to 34.9. You can see in the
nations, using the Ofcom definition which we have adopted, in 2007-08 the
proportion of spend on network production in Scotland, Wales and Northern
Ireland was 6.4%. It has gone up to
7.9%. Although the total cake has been
getting a bit smaller because of this efficiency programme, the share of the
cake that has been spent outside London has been growing. The share of network commissioning from
Scotland, Wales and Northern Ireland has also been growing. This is part of a story over the coming
years to hit pretty testing targets we have set ourselves by 2012 and
2016. By the end of the chart, 2016, we
expect more than 50% of all spend to be outside London and indeed more than
half of all the BBC staff to be based in the nations and regions of the UK.
Q26 Janet Anderson: There was an Ipsos MORI poll last year which
showed that the further north you live the less likely you are to feel the
licence fee is an appropriate way of funding the BBC. Do you recognise that there is still more to do? If I could particularly ask you about the
move to Salford because I understand a number of senior and middle managers
have refused to move to Salford. Could
you explain to the Committee what kind of incentives you are offering staff to
move to Salford? I believe there is
quite a generous package. Could you
just outline that for us?
Sir Michael Lyons: We can take that in two parts. I will just deal with the Trust's
perspective on this and Mark can take the issues of the steps that are being
taken to achieve the move. The Ipsos
MORI poll links directly to the work that the BBC has itself undertaken which
has been very influential with the BBC Trust in its first two years of life
which is as you move further away from the South East broadly affection for the
BBC declines and I think that is why you see people feeling rather more
equivocal about the licence fee being the right way to pay. One of our headline issues is to make sure
that the BBC delivers for all audiences and has a strong geographical component
to it. We believe that it is important
that the BBC has more of its staff working outside of London and the South East
and we have reflected that in the target for 50% of staff outside of
London. The Salford move and the establishment
of BBC North of course is an important part of that but it is not the only
agenda because what comes through very clearly from all of our research is what
people want to see is their lives reflected and represented in BBC programmes. This is not just about where people
are. It is also about the types of
programmes that are made and that is the force of the dialogue that is taking
place and the expectations which are being set for the BBC.
Mr Thompson: The whole of the Executive of the BBC believes
that getting this right is one of the most important things we have to do and
in particular to recognise that it is quite a complicated story across the
UK. On the broad principle that the
further north you go the more question marks you have, it must be said even in
the parts of the UK where the approval is lowest it is still very strong
compared to other public institutions.
The north of England is a particular issue for us. That is partly why we have gone for this
very big development in Salford. Let me
tell you a bit about what is going on there.
There is a package of benefits to BBC people who decide to move from
operations in London to Greater Manchester.
It is very important to say that the cost of this package is in all
cases - there are lots of rather complicated variations of different kinds of
benefit you can get to help you with your move - is substantially cheaper for
the BBC and the licence fee payer than a redundancy for the employee would be.
Q27 Janet Anderson: Some of them might be made redundant, will
they, those who refuse to go?
Mr Thompson: Those whose jobs will close in London will be
eligible for redundancy. We are still
going through a process. Most of the
most senior grades of staff have made their decision. Even this month we have two or three more significant blocks of
staff making their decision. Around
half of those staff whose posts, jobs and programmes are moving to the north
have decided to go, which tells me two things.
One, that the incentives are about right.
Q28 Janet Anderson: Could you tell us what the incentives are?
Mr Thompson: My colleagues will give you the detail. They are essentially a range of things which
help with the physical move of the individual from a residence in London to a
residence based in Greater Manchester.
I believe that we are seeing slightly more people moving than we
predicted. We modelled rather fewer
people moving. Around 45% or 50% of
staff are deciding to move. In my view
for this project, that is about right.
This means that we will be recruiting for a great number of people in
the north of England and looking to get the best talent and the best up and
coming people. When we open BBC North
in Salford Quays in 2011, you are going to see a combination of the
experienced, tried and tested BBC staff in sport, children's and other
divisions who have moved from London but also plenty of opportunities for new
jobs in the region.
Q29 Janet Anderson: Mr Thompson has said that it is cheaper to
offer this package of incentives than it would be to make people
redundant. I wonder if you could just
give us a comparison. What would be the
average cost of making someone redundant?
What is the average cost of the package to incentivise them to move to
Salford?
Ms Patel: Relocation would be roughly a third cheaper
than redundancy.
Q30 Janet Anderson: Could you give us some figures?
Ms Patel: I do not have the exact figures to hand. It depends on the number of individuals and
their length of service as well but, on a typical average employee, relocating
them would cost a third of making them redundant assuming an average life at
the BBC.
Q31 Janet Anderson: You still have not told us what that package
includes.
Ms Patel: One of the things we did this year was we
looked at the package again in the light of the downturn in the economy and
affordability and reduced the level of package, but also introduced slightly
more choice. There are three things
that we will be offering employees.
Firstly, there is a house purchase scheme. I will go through that in a little bit more detail. The second is paying for relocation costs,
the cost of moving, the cost of estate agents, the cost of finding your
children new schools. The third is the
remote living allowance for two years for those people who are still trying it
out.
Q32 Janet Anderson: What is the cost of finding children new
schools?
Ms Patel: All of our packages are in line with the
Inland Revenue's rules on this. For
example, it will be estate agents' fees ----
Q33 Janet Anderson: Unless you educate your children privately,
what is the cost?
Ms Patel: It is the cost of finding schools, going to
see the different schools, helping people.
Carter's, our relocation company, will send a pack of what are the
schools available, what are the schools like.
It is about giving information.
Another part of the assisted relocation is estate agents' fees for
selling your house, reasonable move expenses.
All the expenses will be justified by receipts for the actual
expenditure. There are limits to the
expenditure as well. Can I just talk a
little bit about the house purchase scheme, because I think it is important for
people to understand what that offer is.
We will have two independent valuations if someone wants to sell their
house. They will be priced to sell and
in the current climate it is really important that they are proper
valuations. We will then only offer 85%
of that value towards the purchase of a new house up in Salford. This relocation package is offered by a
company called Carter's so they will take the underlying financial risk. What the BBC will pay is interest costs for
the period between buying the property and selling it and a transaction fee of
£3,000 per property. The BBC is really
limiting how much risk it takes, particularly in the current economic climate.
Q34 Janet Anderson: You are saying that is a third cheaper than
it would be to make them redundant. You
still have not given us an average figure for the cost of the incentives per
employee as compared with the cost of redundancy. You must have that figure somewhere.
Ms Patel: We do.
I do not have it to hand because it really does depend on the individual
circumstances of each individual. If
the Committee would bear with us, we would be able to give you that.
Q35 Janet Anderson: You could not tell us roughly how much it is
costing to move one person to Salford?
Ms Patel: I do not have those figures to hand right
now.
Mr Thompson: What I can tell you is because a higher
proportion of staff appear to be choosing to go rather than choosing not to go,
the outturn of the costs is likely to be lower than the original budget. In other words, it is going to cost us less
than we thought. If I can just
emphasise on the matter of finding new schools, all that is being offered here
is a service of information and advice.
It is absolutely not about paying school fees or anything like
that. It is simply to make sure that if
staff are moving their family they can get information and advice about local
schools in the area. It is perhaps
worth saying that when Zarin was talking about house purchase or this allowance
for living, these are alternatives, they are not additive. Staff have a number of choices: either a
permanent relocation with the guaranteed house purchase at 85% of the actual
market value of the house or, alternatively, if they want to spend a couple of
years seeing what it is like and deciding over that period whether they want to
move, there is this allowance.
Q36 Janet Anderson: Finally, Sir Michael, I notice from the
annual report the licence fee payer pays for your life assurance. Could you explain to me why?
Sir Michael Lyons: Yes. When I was appointed to this post in May
2007, the package on offer and advertised for the Chairman, included entry to
the BBC pension scheme which I did not take up, but I asked that that component
of the pension scheme which related to life insurance - death in service, only
whilst I am in the role - should be continued.
This is only a fragment of what was included in the offer for the job I
applied for that I have taken up.
Q37 Janet Anderson: Private medical insurance was included as
well.
Sir Michael Lyons: Yes, it was.
Q38 Chairman: You work for a public corporation financed by
the taxpayer. Do you think it is right
that the taxpayer should pay your private medical insurance?
Sir Michael Lyons: I come back to the fact that that is part of
the terms and conditions of senior BBC management. The benefits that I receive are very significantly less than
those that were advertised because I do not take up the pension right. I do not take up the entitlement of
door-to-door use of a car which was part of the package that was
advertised. Do I feel that I am
offering better value? Yes, I do, but
it is for others to make a judgment about how well I do the job.
Chairman: You will be aware that the area of salaries
and expenses is one of some controversy perhaps on both sides of the Committee
room so I think perhaps we should move to that now.
Q39 Mr Ainsworth: There has been a certain amount of interest,
I am sure you have noticed, in remuneration both at the BBC and in this place
in recent months. Can we approach this
by way of the general economic climate and the recession. You say that you are not immune from outside
economic activities, despite the fact that you are funded, many would think
very generously, by a licence fee which is set in stone over the five-year
period that we have talked about. Can
we begin to think about the whole question of remuneration with an answer to
the question: how is the BBC affected by these outside pressures? With very low inflation and a steady income
stream, one might have thought that you could be a beneficiary of the
recession.
Sir Michael Lyons: This might be an opportunity to bring Zarin
in as our financial adviser but after she has gone through the issues I am
certainly happy to add a personal comment.
Ms Patel: For us, whilst the licence fee as you say is
a guaranteed source of income, there are two things in the licence fee that
affect us. First is the rate of new
household growth in the UK. In the last
licence fee settlement, we had estimated that some 0.8% per annum, which is
about £30 million, would come from household growth, new immigration into the
UK as well as more single households. As a result of the recession, that 0.8%
estimate of household growth has been reduced to under 0.5% so that directly
affects our income. There is no doubt
also that as disposable incomes come under pressure inflation will come under
some pressure as well. We are seeing
some signs of that in the current year.
Our income is affected a little bit.
Deflation does have an impact on us.
About 45% of our costs are either directly or indirectly linked to
inflation. We are driving through a lot
of savings in our contracts, in pay restraint, which we will talk about later,
as well as in talent costs, which I am sure will come up later as well. What the BBC is doing at the moment is
ensuring that its baseline costs are reducing well in line with deflation. Our estimate is that with quantitative
easing inflation will probably spike in later years and therefore having a
lower baseline now, saving the money now to be able to withstand inflationary
pressure, will be important.
Q40 Mr Ainsworth: You seem to be making some progress towards
the 3% efficiency target. Do you think
3%, given what you have just said, is enough?
Ms Patel: Again for us these are 3% cash releasing
targets for every single year of the five-year settlement. It is useful to go back to the 2005 to 2008
Value for Money programme we had. In
that programme we really reduced our overhead and fixed cost base. We outsourced a huge amount. We took a huge amount out of overheads. The 3% that we are now delivering falls on
all of our programming costs. For
example, in television production, we are taking something like 5% per annum
out of our cost base so these are pretty big, ambitious efficiency
targets. On top of that as a result of
the recession we have been looking again at the level of savings, at talent
costs, pay restraint and also overheads again to ensure that we can withstand
the recession.
Q41 Mr Ainsworth: On the question of pay restraint, belt
tightening and all of that, how do you justify, Mr Thompson, the fact that your
personal remuneration rose over the last year from £816,000 to £834,000?
Mr Thompson: What happened last August was there was a
general pay award across the BBC of 2%.
This was at a time when the retail price index was at 4.8%, so this was
an increase which was 2.8% less than the current rate of inflation. My pay and virtually every other director's
pay went up in line with that general below inflation increase. As you know, I am sure, in the current year
we have imposed a freeze on the pay of staff who earn £60,000 or more. My pay set by the BBC Trust is absolutely
going to be frozen alongside everyone else's.
Most directors whose pay is set out in the remuneration report show a
decrease because they were awarded bonuses last year. We have also decided not to award any bonuses this year and
indeed it has been agreed with the BBC Trust that bonuses for Executive
directors will be suspended indefinitely.
The reason that my pay in the remuneration table shows that 2% increase
is because I am not getting a bonus this year in line with the freeze, but I
waived my bonus last year as well.
Indeed, I have waived my bonus every single year I have been Director
General. In addition, every single year
I have only taken an increase in line with the general BBC increase which I
think every year so far has been below inflation.
Sir Michael Lyons: Could I offer a couple of headline comments
on the Trust's perspective?
Q42 Mr Ainsworth: Including a justification of your own 30% pay
increase?
Sir Michael Lyons: I will certainly deal with that. The Trust has been very sensitive to debate
not only outside the BBC but within the BBC about the right level for top
salaries. This is not new. Indeed, one of my reasons for putting in the
public domain last week the fact that we had commissioned a review in February
of this year of top salaries was to reflect the fact that there have been
discussions now for two years within the BBC.
The mechanism is that the BBC Trust sets the rewards for the Director
General but then sets the framework within which the Executive Board makes
decisions for all other employees. We
tightened the framework last year to emphasise more strongly the public
acceptability of increases and the issue of the importance of recognising that
there should be an appropriate set of relationships within the BBC. We have gone further this year and that is
reflected in the decisions to be completely transparent. The Director General made a very welcome
speech about his commitment to publishing details of all top salaries and all
the expenses associated with them; and indeed the freeze this year on bonuses
and salaries and the step further of suspending the bonus arrangements for the
executive board until further notice, not to be reintroduced without the
approval of the Trust. This is an issue
but I am very clear in all of my public statements about the importance of
getting this right because I do not think that the public will thank us if we
take measures driven by short-term pressures, although those are real, which
make it impossible for us to recruit for the future. It is very important to say that as we look at what is paid
elsewhere, even after reductions in bonuses and incentive payments,
particularly the payment for the Director General does not look out of line
with the sorts of areas that we would have to look to if we were to recruit a
new Director General. Indeed, if you
just look at what is being paid by other public service broadcasters, I think
without exception, although it is not always easy to be sure of the comparable
package and it is not always as transparent as we might want, they are paying
higher reward packages than the BBC pays.
Let me turn to my own remuneration.
Last year I received a 2% increase in salary from £140,000 to
£142,800. My salary is set by the
Department for Culture, Media and Sport.
In fact, they recommended a 3% increase for all trustees. The trustees felt that it was inappropriate
to take a larger increase than was being enjoyed by BBC staff, so they only
took two-thirds of what was on offer, so that is the 2% rather than the 3%.
What you see in the table is the bringing together not only of my salary but of
the costs of my transport, because I have an office in London but I live in
Birmingham, and hotel accommodation which under HMRC rules are regarded as taxable
benefits, although I have to say - and we might even have shared experience in
this room - that I do not regard them as benefits. I regard them as the costs I incur to do the job. If you find yourself sitting in a hotel four
nights a week, I need hardly tell you that is not something to celebrate.
Q43 Mr Ainsworth: You will find a degree of sympathy on this
issue here. The numbers remain for
people sitting in our place eye-wateringly high, I must say, and it is very
difficult not to resort to envy but we will not do that. What you have not explained is why the
figure rose so steeply from £163,000 to £213,000. That is a lot of hotel rooms, obviously.
Sir Michael Lyons: Many more nights.
Q44 Mr Ainsworth: They must be very expensive hotels.
Sir Michael Lyons: Not at all.
When I joined, having previously from time to time visited London and by
and large I actually had some choice over where I stayed, I found the BBC was
nothing like as generous as that. It
gave me three choices. I have chosen
what I regard as the best of those. It
is a chain hotel based in Paddington. I
am not going to give you more details than that for fear that this appears
absolutely everywhere. The point you
address is the increase and let me turn to that. Last year of course was not a full year and this year, thanks to
the joys of the debate about public service broadcasting, I ended up spending
many more days on BBC activity than I had originally anticipated. I rather cavalierly said, when I was
appointed for the job, that I was confident that I could do it in three days a
week. I have to say that was
extraordinarily naïve of me.
Q45 Mr Ainsworth: The number of senior managers who have tipped
over the £100,000 mark, which is now 373 and there were only 340 in the
previous year, is within the 2% increase.
It just happens that they were paid just under and they just flipped
over the barrier?
Mr Thompson: There is a number of things going on
there. Something else this Committee
studied, our commercial arm, BBC Worldwide, has been expanding. You will have seen its turnover has gone
just over the £1 billion mark in the current year and there have been some new
posts there, so there are some new people.
Q46 Mr Ainsworth: Of that 373 who are paid over £100,000, how
many of those come from the commercial business?
Ms Patel: 14 come from the commercial businesses and 19
from the public service of the increase, so the increase in senior managers
earning over £100,000. Last year we had
340 of them; this year we have 373 of them.
That is roughly 1.5% of the total workforce. Of that increase of 33, 19 people were in the public service, 14
people in our commercial businesses and of course in our commercial businesses
they are not just in the UK; they are across the globe as well.
Mr Thompson: On that 1.5% of the workforce on over
£100,000, we do look quite closely at comparable organisations. At Channel 4 for example the comparable
figure is 10% of staff on over £100,000 compared to 1.5% at the BBC.
Q47 Mr Ainsworth: What about the vexed issue of what you pay
your talent? The National Audit Office
recently had a look at the salaries of radio presenters and thought there was a
possibility that you were over-paying.
What is your reaction to that?
Sir Michael Lyons: This is something again that the Trust has
taken very seriously. We know there is
concern amongst licence fee payers and the public at large. About a year ago now we commissioned Oliver
& Oldbarn to do a substantial piece of work to question whether the BBC was
following the market or making the market.
The analysis showed very clearly that with some complications in the
area of radio the BBC was unequivocally following the market rather than making
it. Nonetheless, as a result of that
report, we were very clear that we wanted the BBC to take further steps to
tighten its control of top talent payments, to do more effective benchmarking,
to draw more clearly on audience information and to develop new talent. What we put into the public domain just this
week when we published this report is the progress that has been made on that
front, showing all of those recommendations acted upon. You are right, of course. We commissioned the National Audit Office to
pursue the issue of radio fees which did appear to be the one area where there
was a danger, partly complicated by the fact that the BBC retains performers
who perform on television and radio.
That was one of the issues there.
Q48 Mr Ainsworth: When you say you are following the market
rather than leading it, it is incredibly difficult surely to establish what the
market is, because you do stuff which nobody else does?
Mr Thompson: If I may say so, I think that is a very fair
point. It is one of the points the NAO
pointed to and one of the things they recommended is that we should work harder
at internal benchmarks, in particular comparing for example costs of network
radio with BBC radio stations based in the nations and regions, to try and get
better benchmarks. Having said that -
and the public recognise this - we have exceptional performers and exceptional
radio stations which are not really directly comparable to commercial
radio. They also represent remarkably
good value for money. We have some
fairly well paid broadcasters on Radio 2 but you will see in the annual report
that the cost per listener, per hour of Radio 2 is half a pence. The whole of the BBC by the way costs a
household 39 pence a day for all of the services. It remains a remarkably small amount of money given the
extraordinary range of services the BBC provides. Although of course we need to have proper regard to every cost
line, absolutely to include presenters and broadcasters, in some ways if you
are looking at the efficiency and effectiveness of the BBC in its delivery of
value for money for the licence fee, we also need to look hard at these
measures. By those measures, our
national radio music stations, Radio 1 and Radio 2, are both extremely good
value for money.
Q49 Mr Ainsworth: Do be careful about these very
straightforward measurements. I am a
Radio 3 listener. I look at the figures
and I start to sweat slightly when I see how Radio 3 stands in relation to some
of your other matters. It is not just
about a simple, numerical analysis of who is listening to what.
Mr Thompson: It absolutely is not. At the same time it is quite important to
say in many ways that the most expensive services the BBC makes in terms of
their delivery to audiences are services like Radio 3. I am also a passionate, personal fan of
Radio 3. BBC Parliament is a very
expensive service because it is a relatively recherché pleasure.
Q50 Mr Ainsworth: Extraordinarily recherché. Talk about
minority tastes!
Sir Michael Lyons: This goes right to the heart, does it not, of
the BBC's mission to serve all audiences, coupled with the need to be
distinctive and to do things that other people do not do. When you look at radio and you see the cost
of Radio 4, which is distinctive not only in the UK but arguably across the
world in terms of speech radio and the quality of speech radio, it is important
to remember that it costs more than one and two put together that serve very,
very much larger audiences. That is not
to say that you should do without any of them but they are part of a broad
range of services which justifies a universal licence fee.
Q51 Chairman: You say you do not set the market but you
have to pay the market rate. There are
373 people earning over £100,000. You
really believe that, despite the appalling state of commercial broadcasting,
unless they receive those kinds of salaries they are going to be poached by
your competitors?
Sir Michael Lyons: The Trust is itself concerned to explore this
very issue. That is why back in
February I wrote to the Director General asking him to ask the Remuneration
Committee, which is made up of the non-executive members of the executive
board, to explore in some detail and report back to us on current arrangements,
including whether or not pensions were fully valued and whether there is a
danger from external benchmarking. We
know that there is a debate across the UK economy about whether the
well-established process of external benchmarking is in danger of escalating
top pay and that applies as much in banks as in broadcasting. This is responding to a number of
controversies and also emphasising our interest in the issue of relativities
within the BBC and whether there are any complications arising from an
expansion of those relativities. We are
exploring these issues. I do not want
to sit here and give you the impression that the status quo is something we are
entirely satisfied with but, equally, it is important that I underline that the
primary concern here is to make sure that the BBC is in a position to recruit
and retain the skills that it needs to do a good job on behalf of the licence fee
payer and that we should not get into a token exercise of looking for
reductions or changes which damage that ability. I think that goes as much for the rewards for parliamentarians as
it does for anybody else.
Mr Thompson: The answer to your direct question is yes, we
are still losing senior people. Most
recently, a few weeks ago, Lucy Lumsden, our head of comedy commissioning in
television, a great person who had done a great job for us, has moved over to
Sky. We recruit internally. We have internal promotions of course but we
also are recruiting from the public and private sectors. What is interesting is that of the 60 most
recent senior managers we have appointed into the BBC from outside the BBC, 57
have come from the private sector and only three from the rest of the public
sector. The labour markets in which we
are operating when we are not making internal promotions are predominantly
private sector. We have made two senior
director appointments, both from the private sector, a new director of human
resources and a new director of marketing at the BBC. They will be examples.
People come to the BBC accepting they will get paid less to move to the
BBC, so the BBC is getting talent because it is a great privilege and it offers
great creative opportunities to people.
People come from the private sector accepting they will have to take a
pay cut to come to the BBC. When they
leave and go back to the private sector they typically are going for more
pay. That is the pattern, of a
reduction of pay when you come to the BBC and then an increase when you go out
of the BBC again.
Q52 Chairman: That cannot apply to your talent. Just taking the radio sector, Chris Moyles,
Jonathan Ross, Terry Wogan, you cannot seriously believe that they could
command the kind of salaries that you pay them in the commercial radio sector
at the moment?
Mr Thompson: I was talking about executives and there are
slightly different considerations with executives than there are with talent,
particularly radio talent. Particularly
when you are talking about BBC radio, you are often talking about on-air
artists who have substantial other potential earning ability in television and
even potentially with newspaper columns and so forth as well as their work for
BBC radio. Overall, I believe that our
approach to talent in radio is quite tough-minded about value for money. I also believe that in the relatively small
number of cases where we have really quite highly paid broadcasters working in
key parts of the schedule - typically, breakfast shows and drive time shows -
the benchmarks and processes we use to look as far as we can at what is an
appropriate and competitive way of approaching their pay are robust. I read the NAO's report with great interest
and we are going to look further at whether we need to do more work. Something we always look at is whether there
is an in-house alternative. Is there a
way in which, with some talent you already have somewhere else, you can promote
someone and at least for a year or two on the basis that someone is growing
into the role get them to work for a lower price.
Sir Michael Lyons: If you have a moment to look at that report
we published beside the annual report and progress on the pay of top
performers, one of the most heartening aspects of it for the Trust was the
energy that is being put into really challenging and bringing on new talent,
which I think is the key to this. The
BBC has a track record, which it should do more of, to bring on new talent so
it never finds itself in a position where it does not have a choice. There is absolute agreement on that between
the Director General and the Trust.
That is an area where progress has been made. It has a lot further to go but it is nonetheless welcome.
Q53 Mr Watson: I am new to this Committee so go easy on
me. You have put up quite a robust case
to defend your high paid celebrity talent and I admire you for doing that. You should do that. Under those circumstances though, why do you
let the man from the Daily Mail beat up on you so badly about it? If you think Jonathan Ross is worth the
money, why not tell him just to get stuffed, people like him, he is well
regarded and you are going to stick by him rather than leaving these guys
swinging in the air for months on end?
Sir Michael Lyons: The Director General and I might have just
slightly different views on this issue.
After all, he is responsible for the care of top talent. That is an important part of his job. What is the right perspective for the Trust
to take? It is to question whether we
are paying any more than we need to and to make sure that the BBC has a wide
range of talent that it can draw on, to make sure that it brings forward talent
that audiences appreciate. All of that
you see reflected in that report. I do
not think it is for the Trust to defend but of course there have been some
circumstances in the last two years where some of these names have been
associated with some very serious problems for the BBC and in those
circumstances the right stance, frankly, for both the Director General and the
Trust is challenge rather than defence.
Mr Thompson: I am merely Editor-in-Chief at the BBC. I have not yet gained complete editorial
control of the Daily Mail. I
have a limited ability therefore to influence what they print. I believe that although of course we should
be challenging and striking the best bargains we can in getting top talent with
the artists and their agents, and absolutely going into negotiations in a
tough-minded way, at the same time one of the things the British public want
from the BBC is great entertainment and great entertainers. It was true when we had Morecambe and Wise
in the 1970s. It is still true today. I have been and am very happy once again to
be robust in defending the public's right, if you like, to expect that of the
BBC and the BBC's duty, to quote a former Secretary of State, to take the
business of entertainment seriously and to make sure that as far as we can we
get the best and we allow great entertainers to take risks sometimes within
appropriate boundaries. I believe I
have been repeatedly robust in public in saying that is part of what we should
do. We are blessed to have some of the
best entertainers that the BBC and British broadcasting has ever had working
for us right now. I am proud of that.
Q54 Chairman: Obviously your budget is under pressure as
you have frequently stated. One area is
that of the amount of money you spend on acquired and imported programming. Mark, you told us two years ago that
essentially you were going to cut back on the level of imports, particularly of
American shows. Can you tell us how
much you could reduce spending on acquired and imported programming?
Mr Thompson: Partly because it now represents really quite
a small proportion of total spend, the entire category of acquired programming
is well under 10% of our spend in the rest of the creative economy, the
overwhelming majority, which is commissioning.
There are fluctuations year on year and we have seen a slight increase
from 2007-08 which I think shows 90 million on page 18 up to 101 million in the
year in question. That is a mixture of
a slightly more expensive year in terms of Christmas feature films - that
varies depending on the particular mix in a given year - and slightly more in
the current year on acquired programmes.
In the year we are currently in, 2009-10, that number will go back to
around 90 million. My own view is the
direction of travel for acquisition is likely to continue to be downward over
time. There is a slight increase in
this year but it returns to previous levels next year.
Q55 Chairman: I remember an interesting discussion we had
about the merits of Heroes a year ago.
You might have been aware of some criticism levelled at you in this
Committee by Channel 4 over your acquisition of Harper's Island, where
Channel 4 told us that the BBC paid about one third more than Channel 4
regarded as commercially justified and you outbid Sky, ITV, Five and
themselves.
Mr Thompson: Firstly, the numbers of acquired series that
we are competing for are far lower than they would have been even three or four
years ago. Harper's Island is
perhaps one of two programmes in the last 18 months that we have been in
competition for. The second obvious
point to make is that not only should there be a law against rigging markets
but there is; it is the Enterprise Act.
What we cannot do, as some publishers and broadcasters have sometimes
suggested, is collude with them or agree with them to withdraw from markets. Quite rightly, we are not allowed by law to
interfere with the proper workings of the markets for rights, including
acquired rights. My understanding about
Harper's Island was that Channel 4 ultimately decided for editorial
grounds that they did not want to pursue this particular programme and withdrew
for editorial rather than economic grounds.
Our position is as follows: acquired programmes have a small but useful
role on our networks. When I was
growing up BBC1 was dominated in its prime time by acquired programmes: Starsky
& Hutch, A Man Called Ironside, Dallas, Dynasty. The core of the BBC main schedules - people
forget this - was based on acquired programmes. We do not have a single American acquired programme in peak hours
on BBC1. Elsewhere, we believe they can
add to the richness and flavour of the network. I point out a couple of examples: Mad Men is a programme
which no other British broadcaster, I believe, was interested in; and The
Wire was shown in the multichannel world but we bought it for showing to
the very broad audience, which I think has been welcomed by the public. Occasionally we will find ourselves wanting
a programme which other broadcasters want as well. I have to say the rights' holders understandably would expect a
reasonable open and lawful market to take place in that case. Although I think you would have every right
to be concerned if this was a very large amount of the licence fee and you
could see it going up steadily, year on year, any long-term view will show that
this is an area where the BBC has been withdrawing rather than increasing its
spend. Our concentration has been as
far as possible to invest the licence fee in original UK production. We are the only public service broadcaster -
in fact, we are the only UK broadcaster - to be a net exporter. We are one of the world's largest net
exporters of programmes. The main use
for the licence fee is to make programmes here with British talent and then, as
far as we can, get them to audiences around the rest of the world.
Q56 Chairman: Harper's Island was acquired for
BBC3. BBC3 is going to cost £115
million this year. At the moment, it is
achieving roughly 25% of its target audience of 16 to 34-year-olds. If we look at the top ten programmes on
BBC3, in the last week of June, the top ten were five editions of Match of
the Day, four editions of Eastenders and one edition of Family
Guy, which is an acquired American programme. The composition the week before of the top ten was exactly the
same. It does appear that you are
spending each year over £100 million on a channel which is not reaching very
many of the people it is supposed to and showing them programmes which they
could either have seen on BBC1 or which were American acquisitions.
Sir Michael Lyons: This takes us back to the BBC's mission to
serve all audiences. All of our
research demonstrates that there is more to do in ensuring that the BBC
delivers value to young audiences. This
has been quite a positive year for BBC3.
The earlier discussion distinguished between the need to both provide
programmes which reach a large audience but also to be distinctive. It would be unfortunate if we left the
impression that the figures you have shared summarised the net achievement of
BBC3. If we instead add to that list
things like Blood, Sweat and T-Shirts, which is one of the most
appreciated programmes produced by the BBC this year - and I think from my own
watching of it a very clear public service contribution aimed and very
effectively targeted at a young audience ----
Q57 Chairman: It is Takeaways, is it not? You said T-Shirts.
Sir Michael Lyons: Did I?
Forgive me. Also, Being
Human. This has been a year for
some very distinctive material coming from BBC3.
Q58 Mr Ainsworth: What exactly is the public service value
behind Family Guy?
Sir Michael Lyons: As John Reith would have underlined, going
back to his very clear statement right at the very beginning of the BBC, one of
its functions is to entertain as well as to inform and educate. It is important that we get the balance
between those right. I am just
underlining that from the perspective of the Trust on behalf of young audiences
we see this as a year of quite notable progress for BBC3.
Mr Thompson: I agree with him.
Q59 Mr Ainsworth: Not for the first time.
Mr Thompson: If you look at the schedule - I am very happy
to look at the schedule for the present week - you will see absolutely that we
have some programmes like Family Guy which are bringing an audience into
BBC3. You will also see for example
this week the series on pregnancy, My Big Decision. It is an absolutely classic piece of
public service broadcasting aimed at that target audience and looking at quite
interesting and difficult questions around sex, health, pregnancy and the
decisions that young people sometimes find themselves making. I would say at the moment under the control
of Danny Cohen's leadership, the level of creativity, and Being Human is a good example of that, is very high. More than that, in some ways some of the
team on BBC3 might kill me for saying this, a rather classic public service
method of investigative journalism, programmes which confront young people with
some of the big issues in their lives and of the day, is absolutely part of the
mix. The reason this channel is winning
awards, the reason its share in reach is going up, is actually because it has
got a mixture of programmes which in my view are a very good definition of the
best of public service broadcasting.
Q60 Chairman: It is terribly easy - the BBC always does
this - to justify the entire cost on the basis of the fact that there are some
very good programmes, and there are some very good programmes, but are you
really confident that justifies £115 million on their own channel?
Mr Thompson: Firstly, what is happening in the current
portfolio of channels is that BBC3's budget is actually slightly declining in
relation to the others. There has been
a slight movement of resource away from BBC3 towards, for example, BBC4. Over time you are going to see a slight
reduction in the BBC budget. Moreover, I
believe you are seeing the money we are spending on BBC3 being put to better
and better use. I think you can see
that in the awards the channel is winning and the number of programmes which
migrate from BBC3 to our main network.
Something else we want to try and do is get the flow of new talent and
new ideas working even more effectively from our digital channels to BBC1 and
BBC2 and BBC3.
Sir Michael Lyons: Can I just come back to the headline issue
here, if I can. I do not want you to
see my comments as in any way complacent.
I think it is very important that the Trust flags when it feels progress
has been made. One of the reasons why
we are confident progress has been made is we have just completed our review of
services for young people which showed a very strong audience support for BBC3
and progress against our key issue of more distinctive television, which is at
the heart of your question I think, Chairman.
The tone that we strike in the report as a whole is even more relevant
to BBC3. I want to acknowledge that
progress is made, not only in terms of retaining reach but very particularly
providing more distinctive material with all of the indicators pointing in the
right direction, although the changes are modest. Are we satisfied? Not at
all. The pressure that we continue to
apply for more distinctive programmes, a stronger emphasis on bringing new
things forward, of dropping things which are regarded by audiences as past
their sell-by date, will continue.
Q61 Chairman: I would like to press you on the cost. £115 million is a lot of money already in
the present climate, but, as I understand it, that figure ascribes no cost to
BBC3 at all for their top programmes which are transferred from BBC1, so EastEnders and Dr Who, which bring in very large audiences, are costed at zero to
BBC3.
Mr Thompson: But that cuts both ways, so when Little Britain moves from BBC3 to BBC2
and then to BBC1, again the current accounting approach we have has been to
ascribe the full cost to the originating network.
Q62 Chairman: Usually when they move in the other direction
it is not a repeat of the show shown on BBC3, whereas in this case BBC3 was
showing repeats.
Mr Thompson: No.
To be quite clear, we would define an episode of, let us say, Little Britain, which is shown on BBC1
having previously been shown on BBC3, as a repeat. There are repeats both ways.
Q63 Chairman: That £115 million, therefore, is actually
being spent on a relatively small proportion of programmes if you take out all
the programmes which are BBC1 first showings?
Mr Thompson: I think what is encouraging is that the cost
per viewer hour of BBC3 is coming down and down because it is becoming more
popular and more and more people are finding this programming. It takes time for new television and radio
stations to get established, but the progress of BBC3 is very positive.
Q64 Chairman: BBC3 has been around for quite a long time.
Mr Thompson: But if you look at the history of BBC2, of
Channels 4 and Five, it takes years to establish new television channels in the
public's mind.
Mr Watson: Have you not got a young audience who do not
do telly any more, they are pulling down their content through the net and they
do not just see the BBC as their channel?
Should you not be migrating some of this content, and my Radio 3
listening friend should know the benefits of Family Guy, it is very entertaining show ---
Mr Ainsworth: I did not say it was not funny!
Q65 Mr Watson: Are young people not downloading through
iPlayer? Could you not be channelling
this content in another way, more cheaply?
Sir Michael Lyons: This week, of all weeks, we should be
cautious about being confident that all young people behave the same because we
have seen evidence published this week which demonstrates that some of the
assumptions about young people's consumption are wrong, there is room for
discussion. What came out of the
service review was very clearly that young people continue to value
television. Yes, they do use the
iPlayer but it is not their sole mechanism for viewing. They do value shared moments of family
viewing. Although they might be rather
better than those of us who are rather longer in the tooth at doing several
things at once, television still plays an important part in their lives.
Mr Thompson: The programme for the Committee we are
recommending tonight is Make My Body
Younger. It is about someone who is
seeking help when her addiction to partying begins to threaten her professional
security. I will send you all copies.
Q66 Chairman: I am still waiting for you to send me the
copy of Bizarre ER, which you
promised me last year.
Mr Thompson: I will do.
I warned you, did I not, not to try it at home. I will send you the DVD.
Q67 Mr Watson: When it comes to my section on online
perhaps we can tease this out a bit more.
The trend is away from channel delivery to young people, is it not? Are you not chasing a diminishing audience?
Mr Thompson: What I want to say, Mr Watson, is firstly
there is a reason why we made BBC3 the first BBC television channel to stream
live on the web, because we recognised that is an effective way of reaching a
target audience. When we have a
programme like Being Human, the
overwhelming bulk of the cost is in actually making this piece of content. We are working very hard to try and find as
many ways of getting this content effectively to audiences and in ways which
are convenient for the audience and that absolutely means the iPlayer and
extensive use of mobile. We have a service called GSCE Bitesize, which is a revision service for young people doing
those exams and the equivalent exams in different parts of the UK. Mobile phones are an incredibly important
mechanism for transmitting GCSE Bitesize
to the target audience because mobile phones play such a big part in these
young people's lives. I want to assure
you that we are looking very, very hard at this. Of course, one cannot rule out the thought that at some point in
the future linear television channels will make less sense for some
audiences. My own view is if you look
at young people's viewing of television, actually the presumption, and this
goes back a little bit to what the Chairman was saying, that young people are
"turning away" from television is not really based on the data. The fact of the matter is, despite video
games and everything else, overall television viewing is increasing. Although it is not true that young people's
viewing of TV is increasing, it is not declining as quickly as many people
would argue.
Q68 Mr Watson: The study on digital natives said that when
given the choice of losing TV or Internet, three-quarters of under-30s would
say they would lose TV. That is a
tangible difference from my generation, the Eric and Ernie generation. That is not going to go away. These people are under-30, they are using
the net in very different and creative ways and are detaching themselves from
telly at a rapid rate of knots. I would
challenge your complacency on that a little bit.
Mr Thompson: I am not trying to deny this trend is
happening. What I want to say is I think
it is a slightly more complex picture than you are painting. For example, when we can find programming,
and this is quite a new rediscovery for us, like Dr Who and Merlin which
work for young people and, by the way, work for their parents and grandparents
as well, young people quite like the idea of getting in front of the television
and watching something with older relatives.
That idea has not gone away even though, of course, what they also
expect is that there will be a website, there will be mobisodes on mobile
phones and all the rest of it. The
broader point is this is a kind of both/and world and it is too simple to
imagine linear television is over for young people. They will still use linear television but, of course, they are
very interested in using other devices as well.
Q69 Mr Watson: So why not make BBC3 more interactive with
the online service? I hate to bring up
your rivals, Channel 4, but what they have done with Battle Front for adolescents is remarkable.
Mr Thompson: I agree.
Q70 Mr Watson: If that is what you believe, why is BBC3 not
more enmeshed in net content with the way it delivers its service?
Mr Thompson: I would honestly encourage you to have a look
at what we have got behind some of the sites on BBC3. We think that across our television services we are right now
leading the field in interactivity, especially interactivity for younger
audiences.
Sir Michael Lyons: You do go to the heart of the dilemma facing
the BBC as a whole, the Trust and the Executive, as you try, within no real
growth in the licence fee, to respond to changing audiences, preferences and
behaviours at the same time as you try to maintain existing services. That is at the heart of the debate that we
are engaged in here and at the heart of the debate about any increased
expenditures on bbc.co.uk which
actually plays into this debate which, again, has been the subject of
considerable Trust discussion this year.
Q71 Mr Watson: If the Chairman will allow me to open that
up. You have been online since 1994.
Mr Thompson: Yes.
Q72 Mr Watson: Since then you have spent about a billion
pounds on your online service, having gone back through your accounts. Would you say we have had value for money?
Sir Michael Lyons: Let us look at two possible answers to that.
Q73 Philip Davies: Yes or no.
Sir Michael Lyons: I really thought you were looking for a more
sophisticated answer, but let me start with yes and then give you a bit more
detail. When the Trust undertook its
review of bbc.co.uk what was
absolutely unequivocally the headline finding was how much this service was
valued amongst its users. Let me say,
not just by us in our homes and on our mobiles, but increasingly it is valued
as a tool of the British economy. One
of the points that is made to me most frequently, although this was not
explicitly picked up in the review, is from the captains of British industry
that this is a very important tool in business life in this country. That is why you find in the latest
statistics, reinforcing it again, that of the top ten most used sites in the
UK, bbc.co.uk, currently ranked
fourth, is the only one of the top ten of UK ownership. If you put that together with the very
detailed review, I think you can see that this is not only a valued
intervention by the BBC but very important to the British nation.
Mr Thompson: Now we have got well over 20 million people
using the website every week, it is established for the public as one of the
things the BBC does and the BBC is no longer just a television and radio
broadcaster in the public's mind, and they welcome that.
Q74 Mr Watson: You have given me a partial answer on whether
you think it is value for money, and obviously the web is new and you have got
to try these things out, I understand that, but what about using the leverage
you have got to create new and original creative content with the web? Do you think you are using your authority
and power rightly to do that?
Sir Michael Lyons: Perhaps the Director General is more
appropriate to answer that in detail.
Certainly in our review, once again, we have continued to press, and
will continue to press, our headline concerns of serving all audiences and
distinctiveness in BBC output. I have
not spent much time on the distinctiveness issue today. In looking at where the British public feel
that the BBC has more to do to deliver against its public purposes, the issue
of producing distinctive output is the one that demonstrates the biggest gap,
so that is right at the top of our agenda.
There is absolutely no room for complacency here. We have recently agreed an increase in the
budget for bbc.co.uk content for this
year, all of it based on new developments, new content coming forward. Do you want to say more?
Mr Thompson: Let us scale this. 5% roughly of the 39 pence that we cost each house, or
thereabouts, a couple of pence, is going on the website. My answer is this: on the first stage of the
web and the first stage of the content that became possible on the web, the BBC
did pretty well delivering a good essentially text-based news site and then
information across a broad range of subjects.
The second step, which we are currently engaged in, which is about
getting much more video and audio on the web, again we have made progress. Perhaps I am agreeing with the thought
behind your question. There are
incredible creative opportunities here, new opportunities. Do I think the BBC is fully seized of them
yet? I do not think we are. We are still wrestling with what 360 degree
commissioning might be. If you look at Darwin on the BBC this year, or the
poetry season, we are trying to use the web in interesting ways, but I think we
have just scratched the surface. The
potential is there, particularly in areas like knowledge building, history,
science, the arts, culture, and also for sharing. A lovely little partnership that was mentioned in the report was
with the Tate. The Tate were doing
Francis Bacon last autumn, a wonderful exhibition. They rang us up and said, "What have you got on Francis Bacon?"
and instead of the usual, "Don't bother us now", sort of thing, we looked in
the archive and found hundreds of hours of Bacon and some untransmitted
interviews on Bacon which we gave them for their website rather than our
own. I would say potentially this is an
area of enormous creative potential and we could do, and must do, more to
exploit it.
Q75 Mr Watson: I acknowledge that you are saying you are
partially there. There is not quite a
4iP model, is there, in the sense I do not perceive that you are looking at
digital start-ups and trying to surface a Google or a Wikipedia in the UK so
that we can compete against the world.
Mr Thompson: I could not disagree more. We signed our
first contractual arrangement with Google Youtube more than two years ago and
we have very strong relationships with the big American players, the strongest
of any of the UK broadcasters. More
than that, remember we are committed to 25% of our commissioning - minimum -
going outside the BBC absolutely to small start-ups. We would absolutely say that for the last few years we have been
very much focused on working with that industry. It is going to be a big part of the future of the creative
industries and we would say that 4iP is a response to some of the ideas that we
put into the market a few years ago.
Q76 Mr Watson: Sir Michael, the Graf Report in 2004
recommended that you have a governor who has got a professional web
background. Have you managed to plug
that gap on the Board yet?
Sir Michael Lyons: Of course, it is not in the gift of the Trust
to go and recruit willy-nilly its own members, that is actually a process that
is done through DCMS. During the life
of the Trust so far, just two and a half years now, there has only been one
vacancy and the priority we attached at that point was to finding someone who strengthened
the financial and business skills of the BBC Trust. We do have, amongst my colleagues, people who have an interest
and, indeed, skills and knowledge in this area. Whether Philip Graf's recommendation in the context of the old
governors has been fully discharged, I would probably say it has not been.
Q77 Mr Watson: So we have got to put pressure on the DCMS on
that one. I am new to this Committee, I
do not know.
Sir Michael Lyons: Or they can change the rules and allow me to
appoint trustees and that might be a welcome freedom.
Q78 Philip Davies: In your section on serving all audiences we
have got the usual guff that we get in every Annual Report under "Equality and
Diversity" and it is the sentence that you read in every organisation. We have actually shamed Channel 4 into
taking it out of their Annual Report, thankfully, so we will have a bash at the
BBC. They are not short on political
correctness at Channel 4, I might add, but even they have been shamed into
taking it out. It is the sentence that
says: "We believe that to represent licence fee payers most effectively the BBC
staff should reflect the diversity of the UK population". It is the same guff you hear in every
organisation, if I might say so. It is
meaningless because there is a proportion of the UK population that is
persistent criminals, so is the BBC saying under this mindless kind of sentence
that it believes in recruiting a proportion of persistent criminals because
that would help to make up and reflect society at large, or do you accept that
it is actually meaningless guff?
Sir Michael Lyons: I do not accept that it is meaningless. Let us go to the heart of this. I have said several times today, and
reiterate it again, the Trust is concerned that the BBC needs to do more to
ensure that it delivers value to all parts of the United Kingdom, that it gets
better at understanding the diversity of views, and let us not go for any one
set of characteristics, be they ethnicity or age, but understands better the
characteristics which define different audiences. That is about running a great business and a great set of
services for the public. How do you go
about doing that? It is partly about
research, but it is also about the type of people that you employ, where they
are based, what their history is, what their characteristics are. I am absolutely convinced that you are
likely to run a more effective organisation in serving a very disparate set of
views and aspirations if you are rather better at representing those
experiences amongst your workforce. How
do you make that a reality? For most
organisations, and certainly for most public organisations, it is about how you
ensure that your recruitment processes are open and you monitor what you
do. Let me just go one step towards you
if I can, Mr Davies. I also believe
that this is not just a matter of routine, of putting it in the statements, it
is about leadership. This year in the
annual review of the Director General's performance, when he and I sat down to
discuss the very considerable achievements this year under his leadership, we
talked not only about the progress that has been made in this area but actually
about the importance of demonstrating publicly that there is further to
go. You see that reflected in his
objectives for the year and, indeed, in his personal commitment to that. I agree with you that it is not just a
matter of routine.
Q79 Philip Davies: We do not seem to have got the same
commitment from you as from Channel 4 that they accept it is rather mindless
and meaningless and will take it out in future and not insult our
intelligence. Anyway, we live in
hope. The same paragraph goes on to
say: "One of our major ongoing concerns is the proportion of staff at a senior
level from black and ethnic minority backgrounds. The proportion has risen from 5% to 5.6% but still lags behind
our original target of 7% which we had hoped to achieve by 2007. We have made it clear to the Executive that
we expect them to take action to address this". You said that what was important, particularly for a public body,
was that there was an open selection process.
I would say what is important is that people are selected on merit, and
merit alone, and that people's race, religion and gender should be totally
irrelevant, the organisation should be colour-blind. Can you tell me what action you are expecting the Executive to
take on this front as you have put in your Annual Report?
Sir Michael Lyons: I welcome that question. Let me firstly stay that there is absolute
clarity here that we do not want any dilution in terms of the expectations of
the BBC in terms of the skills that it is looking for, but, frankly, it has to
get better at finding those skills in a way that makes sure the BBC to anybody
looking at it is transparently reflecting this country at large. You and I both have the same experiences as
we move round the country. The strong
feeling in some parts of the country is that there are communities which do not
feel as fully represented in the public bodies of this country and that is an
issue for which we are all responsible.
Let me to ask the Director General to say a few words about the steps he
is taking.
Mr Thompson: I believe appointments should be made on
merit, absolutely believe that, and absolutely without regard to race, gender
or religion. That must be right. To give you an example of one of the things
we are doing at the moment, and I happen to be involved in it personally, we have
got a mentoring scheme. The mentoring
scheme is working with people who are just below the senior management, who are
rising stars, and some of us in more senior management are working with them,
helping them to develop their careers, make sure they have got the right
training to give them a stronger chance of thinking about their career and
developing their career and competing for those jobs. When jobs come up they should be done exactly as you said, on the
basis of merit.
Q80 Philip Davies: If you have an open process and are selecting
people on merit, given that there are an awful lot of talented people amongst
ethnic minorities, why do you need a target because these people will come
through and be selected on merit anyway?
If it happens to be that the best people for the job are the people you
go for and the end result is that means 6% of people are from an ethnic
minority, or 8% or 9%, why does it matter?
Why have a target of 7%? Surely
if you just have that open process and selection on merit you do not need this
kind of quota.
Sir Michael Lyons: As you know, your own party decided that it
needed to ---
Q81 Philip Davies: It is what you are doing that I am interested
in. I will ask my own party similar
questions, but I am asking you about the BBC.
Sir Michael Lyons: The issue might be more fundamental. If we come back to why we are setting the
target, it is because we believe that there is a need for leadership in this
area. We are not alone in that. Your own party, the Metropolitan Police,
other public bodies believe that targets need to be set and leadership needs to
be given.
Q82 Philip Davies: If we can move on because we started on the
political correctness front and this brings me on nicely to Peter Sissons, who
left the BBC. Mark, you were saying
earlier that you are losing senior staff and putting it down to pay, but it is
not just pay because Peter Sissons was happy to leave the BBC not because of
pay but because it had become too politically correct. The final nail in the coffin for him was
that apparently he said he wanted to ask Harriet Harman why the Queen had not
been invited to the 65th anniversary commemoration of D-Day and the
response he was given by his bosses at the BBC was that it was not a topic
worth raising because it was only a campaign being run by the Daily Mail. What do you make of Peter Sissons' comments?
Mr Thompson: If you watched or listened to the BBC's
coverage of that controversy, it was very extensively covered and numerous
politicians were asked about it. We
covered it over a period of days before the ceremony took place in Normandy.
Q83 Philip Davies: Are you saying he is lying by saying he was
told not to?
Mr Thompson: I watched and listened extensively to the
BBC's coverage and I could not see any evidence in the broader coverage that
there was any desire by the BBC not to cover that story, it was a very good
story which I thought we covered extensively and interviewed multiple
politicians. I do not know what was in
Peter's mind when he said it and I was not party to any of the conversations he
had. I cannot recognise from our
coverage that point at all, I thought we covered it objectively and fairly and
it was manifestly a perfectly legitimate story to explore.
Q84 Philip Davies: You also said earlier that there were lots of
people in the BBC with lots of different views. One area where that does not appear to be the case is in some of
your coverage on certain issues because Peter Sissons went on to say that the
Corporation's view on global warming was that effectively BBC policy was to
ignore climate change sceptics. What do
you make of that?
Mr Thompson: It is simply not true. We have continued to broadcast the views of
a range of experts, both scientists and non-scientists, who take a range of
views, both about whether global warming is happening and whether it is
anthropogenic and what the appropriate response by different governments should
be to that. I think it is true that one
of the benchmarks the BBC has used over the past decade have been the regular
reports from the IPCC, the International Panel for Climate Change, set up by the
United Nations. It is a topic which the
majority of expert opinion, as represented by the IPCC, has influenced. We have reported on the IPCC reports and
also used them to some extent as a benchmark for majority expert opinion on
this topic. We do not exclude different
voices. The voices range from those who
believe it is not happening at all, whether they are scientists or not
scientists, and who bring a very precise perspective to it, to those like my
friend and colleague, Jeremy Clarkson, who brings a broader dose of scepticism
to the topic. You will hear plenty of
people on the BBC who ask all sorts of questions about whether it is happening,
or if it is happening whether it was caused by humans, and if it is caused by
humans what the appropriate policy response is.
Q85 Philip Davies: So you are satisfied that your coverage on it
is entirely fair, balanced and impartial?
Mr Thompson: The BBC is a big organisation and we
broadcast many programmes and many services.
I believe that the thrust of our coverage on climate change has been
very good. The challenge we face now,
having got to the first stage of extensively exploring the phenomenal, is
making sure that we are as thorough as we can be in making sure the public
understand the policy debates now about the different solutions that are being
proposed by different parties and others in the debate.
Q86 Philip Davies: The BBC's view is climate change is
happening, there is no doubt about that.
Most of the parties are agreed on this, are they not, so just an
argument between the parties on this is not really going to give you a balanced
view, is it?
Mr Thompson: I really did not say that at all. What I said
was we believe there should continue to be a broad debate on the topic and we
should have proper regard for the fact that the majority of expert opinion
amongst scientists and climatologists is that there is a high probability, most
recently at 80% by the IPCC, that anthropogenic climate change is taking
place. An analogy: we do sometimes have
on the air people - the painter, David Hockney, would be an example - who doubt
that smoking is bad for your health.
However, we do not think it is responsible to believe the balance in the
context of smoking and health is one person who doubts the majority medical
opinion for every time we have a doctor or another medical expert coming
on. Having someone like David Hockney
coming on once in a while and talking about it is fine. In the case of climate change we have
extensive critical voices who frequently discuss this. Lord Lawson's book, for example, was
extensively discussed on different BBC programmes. We do have some regard to the benchmark evidence of where
majority scientific opinion stands, and as that moves the benchmark moves.
Q87 Philip Davies: Can I just ask you about one final
issue. You talk about reach to the BBC
and the importance of quality. I would
submit to you that one of the sports that has probably the greatest reach in
terms of all sectors of society being interested in it is horseracing. I would also submit to you that one of the
things the BBC has been renowned for in the past in terms of quality is its
horseracing coverage. In fact, it was
recently winning awards. I remember
being brought up as somebody who followed Peter O'Sullivan's commentaries and
he was probably the epitome of high standards within the BBC.
Sir Michael Lyons: Yes.
Q88 Philip Davies: Yet you are hugely reducing your amount of
horseracing coverage on the BBC, which seems to me to be going against the
spirit of quality and reach. Would you
like to have a rethink about this?
Sir Michael Lyons: Let us first say there is no doubt here that
the BBC is cutting its cloth to meet the resources that are available, not to
mix my metaphors. Within this licence
fee settlement the only way that new plans are accommodated is by following
what the Director General brought to the Trust in the autumn of 2007, which was
a concentration on quality and fewer, better programmes, and that is exactly
the strategy that we see being carried through in sport.
Q89 Philip Davies: You say the BBC has got to cut its cloth, but
let us face facts, the BBC has a guaranteed never-ending increase in its income
so there is not a lot of cutting of its cloth that needs to be done.
Sir Michael Lyons: Let us be very precise. It is not continuing to increase, it is
static in real terms. Let us then come
to this issue: against the expectations of the public, against the expectations
even of this Committee that we have heard reflected here, to do better on
online services, to do better for younger audiences, there is always more to do
than there is a budget to provide for it.
To pretend that the BBC does not have to make tough choices is, frankly,
not very helpful to us. This is one
area where there has been a careful review and I think I should hand over to
the Director General to give you some more details on that review and the
decisions reached.
Mr Thompson: One can sometimes get the impression
listening to Members of the Committee that you think the licence fee has been
increasing in real terms. So far, this
is a settlement which has been below the rate of inflation and our prediction
is by the end of the settlement - based on mid-case assumptions about both RPI
and CPI - it will turn out to have been less than inflation by both the retail
price and the consumer price index.
Q90 Chairman: You are still getting household growth
though.
Mr Thompson: It is true we are getting household growth
but you will also remember, Chairman, that a significant proportion of the
settlement goes not to BBC services but to the targeted help scheme and the
marketing costs for analogue to digital television switchover. The expectation is that the amount of
licence fee, even taking household growth into account, with mid-case assumptions
about inflation in 2010, 2011 and 2012, will be below inflation both by RPI and
CPI terms. In other words, it will be a licence fee which has declined in real
terms over the period. The BBC's
funding is stable, not forever but for five years, but it is declining in real
terms. That is the background.
Q91 Philip Davies: Your racing coverage goes way beyond
that. The cut in it is much more severe
than that. The Racing Post ran a petition about this and they had 180,000
signatures which were presented to 10 Downing Street fairly recently, along
with Frankie Dettori and Peter O'Sullivan, who was appalled by the reduction in
coverage planned by the BBC. Those
180,000 people, and people of the calibre of Peter O'Sullivan and his heritage
in the BBC, do they not mean anything to you?
Do you not want to go back and reflect upon what all of those people are
saying?
Mr Thompson: What I want to say is we are very proud of
the racing we cover on the BBC and we have many of the great dates in the
racing calendar, we are very proud to cover them and we know the public expect
events like the Grand National and Royal Ascot from the BBC. There are two specialist racing channels and
I believe with the specialist racing channels which are there, with a very
significant commitment by the BBC to carry as many of the great dates as we can
in the racing calendar, and add to that what I hope will be continued
commitment by Channel 4, which since its foundation has taken over from ITV the
largest responsibility for covering racing, you have two terrestrial public
service broadcasters committed to racing and two specialist channels, I think
that is a pretty reasonable delivery of this sport to the British public, to be
honest.
Q92 Mr Ainsworth: We ought to get back to the Annual Report at
some point, but since Philip Davies has raised the question of sport, and I am
hoping to leave here and go and watch a bit of Test cricket at the earliest
opportunity, can I raise the question of cricket. I think it is an enormous pity, notwithstanding the brilliance of
Test Match Special obviously, that
you are not showing cricket on television.
Do you regret not making a play for that, particularly in the light of
the huge success of the Twenty20 championship and the fact that we have got an
Ashes series on in England right now?
Sir Michael Lyons: The heart of this problem is it is right of
the moment with the review of the reserve sporting events, which we just signed
off the BBC's response to at the Trust Board meeting yesterday. At the heart of this, is it not, is the
tension between the opportunity for governing bodies to secure very, very
substantial sums of money from selling their rights and the pressure on the BBC
as to whether it can reasonably compete against other broadcasters who are in
very different circumstances. It is a
helpful case study, of course, because it reminds us that although much of the
debate about broadcasting over the last couple of years has focused on the weak
and declining broadcasters, actually there are winners in this case as
well. We are in a world in which Sky
now has even bigger revenues than the BBC.
The Trust line on this is very clear: we are absolutely clear about the
importance of sport and the value that audiences place upon it, but we are
equally clear that the BBC simply cannot be held over a barrel when it is faced
by sums that would take a disproportionate part of the licence fee. That is the dilemma that the Director
General and his colleagues have to manage.
Mr Thompson: Again, we are very proud to have radio rights
to Test Matches but it is worth saying that it was the decision by the ECB to
leave BBC Television in the 1990s after a partnership lasting decades. It was not the BBC's decision to abandon
Test Match cricket, the ECB decided to leave the BBC. Had they not done so, I am quite certain that Test Match cricket
would still be on the BBC.
Q93 Mr Ainsworth: Thinking back to those times, I seem to
remember that the ECB rather felt that the BBC was not showing an adequate
degree of interest in continuing that relationship. It is history now.
Mr Thompson: I think it was more a question of money
actually. At that point they appeared
to give an undertaking to the then Secretary of State that they would make sure
that at least some Test Match cricket was available free-to-air. That was an assurance which manifestly has
not been maintained. My view about
cricket is looking hard at whether we can give the right flavour, particularly
with these rather exciting new developments of Twenty20 and one-day
competitions, and keeping an open mind about Test Match cricket is the right
way forward. To be honest, this whole
process of taking Test Match cricket away from free-to-air broadcasting,
leaving us in the situation where the incredibly exciting end of the first Test
is watched by something under a million people - it could have been ten million
people had it been available free-to-air - is something which is absolutely
bound up with the decision taken by the ECB to depart from the BBC. Secondly is the fact that one absolutely
recognises this is a sport with important grass roots and it has got its own
economics, and currently manifestly cricket has economics which are based in
part around significant pay television revenues.
Q94 Mr Ainsworth: Also a sport with a very interesting ethnic
profile in terms of its reach.
Mr Thompson: I agree.
Sir Michael Lyons: You find no disagreement here, this is a big
public issue, not only in terms of what audiences want to see but the dilemma
facing governing bodies, and clearly the opportunity to sell their rights to
the highest bidder brings a stream of income in, of which the ECB is a very
good example, which is used to improve facilities, but by moving away from a
mass audience to a minority audience you run the risk of losing the interest of
the participants in the future. It is
quite a challenge and one of those that David Davies and his colleagues have to
balance in their review.
Q95 Mr Ainsworth: Can I row backwards to young people. We were talking earlier about the
difficulties of engaging young people in the context of the discussion we had
about Family Guy, but you highlight a
particular problem in reaching young people with news and current affairs under
the citizenship agenda that you have set yourselves. What are you going to do about that?
Sir Michael Lyons: My only intervention here is to say the Trust
is very focused on this as a result of its services for young people and it is
one of the areas of intense challenge for the Executive.
Mr Thompson: I will give you a couple of examples of
practical steps that we have been taking.
It is trying to find places in the schedule where you are likely to
reach younger audiences. The founding
of a short but rather good eight o'clock bulletin on BBC1 of news headlines,
both UK and national or regional headlines, aimed to sit typically at the end
of EastEnders, a programme which
continues to get a very big young audience, the particular way in which we
deliver the news on BBC3, obviously support for Newsbeat on Radio1 but also development of the Newsbeat website, so you have got a way on the web of capturing the
imaginations of young people with a tone of voice and a news agenda that is
more likely to work for them, these are all things we can do. Also, there are some very interesting other
things going on. Question Time, on the face of it the kind of mainstream BBC news
and current affairs television programme you would expect would have an older
audience, has a surprisingly young audience.
It turns out that many young people actually find the cut and thrust of Question Time very interesting. When we do our Schools Question Time, which is a very big competition where
schools compete to produce an edition of Question
Time, and we had a special edition of the programme done last week which
was really based around editorial decisions and guests chosen by young people,
again that is an attempt to try and engage young people in the news. Finally, School
Report is something we do in schools up and down the country which is
growing in strength every year. This is
a chance for schoolchildren to get a chance to have a go at making their own
television and radio news and pooling their work into something which at
national level we can play out across the web.
These are all ways of trying to hook them in and also to get them to
think about how news and journalism works.
Q96 Mr Ainsworth: In relation to formal education, again your
own report says you failed to match expectations in attracting under-16 year
olds. It is not that you are not trying
but what you are trying is not really working at the moment, is it?
Mr Thompson: In terms of formal education we have a very
successful service in Bitesize and
that is very, very widely used, used by the overwhelming majority of young
people taking the relevant exams. We
have a good track record in broadly educational output, our natural history
output and so forth. We are doing
reasonably well in meeting the needs of teachers in providing audio-visual
material, and I am thinking here of the Learning Zone broadband project, and
giving teachers what they want, which is no longer typically whole programmes
but segments and material they can use in the warp and weft of lessons. What I would say is that formal education
and capturing the imagination of young people with content which feels like it
is directly relevant to what they are doing in the classroom and at home, doing
all of that in a way which does not adversely affect the market for educational
software and textbooks and so forth, is one of our big challenges. It has been a disappointment in recent years
and it is one of our big challenges.
Q97 Mr Ainsworth: First of all, is it the case that viewer
numbers for Newsround and Blue Peter are continuing to fall? If so, is that not really quite a serious
worry because most of us in this room will have begun watching the BBC with Blue Peter, it is the way you hook them
in. That must place a serious threat to
the future.
Sir Michael Lyons: That was explicitly picked up in the Trust review
of services for children. That led us
to be absolutely unequivocal in the priority we believe should be attached to
the scheduling of children's programmes.
That is a matter where we are awaiting the Executive's response. I should say in the spirit of frankness that
the area of learning is probably the area where the Trust has the most concerns
about the need for urgent progress. The
Director General is aware of that and that is something which we are very strongly
focused upon. You are touching on areas
here which are very much issues of intense attention.
Mr Thompson: We are certainly wrestling with this
challenge. You will appreciate that
increasingly children's first port of call, if you like, in terms of children's
output today on the BBC is CBeebies and CBBC, and these are very successful
services and the websites are very successful.
Looking at the value of these important slots on BBC1 and BBC2 in
getting broad reach amongst children to these programmes, and looking at the
programmes themselves to see what we can do with those programmes, we are
considering that and will be coming up with some conclusions and discussing
those with the Trust in the autumn, I hope.
Q98 Paul Farrelly: I just wanted to come to one project before
coming onto Worldwide, where some of your competitors in the industry have
started to raise some concerns, and that is Project Canvas. I think we have done Project Kangaroo to
death almost in the past. I just wonder
whether you can say a little bit about the Trust's current approach towards
Project Canvas.
Sir Michael Lyons: This is formally under examination at the
moment. It is a non-service
approval. Forgive me for using that
terminology, but basically this is going through the same process as Freeview
went through. It basically has the same
two components, an examination of the public value likely to be secured and
also of the likely market impact, but a slightly briefer exercise than a full
public value test. The stage that this
has got to is the first stage of consultation has been completed with a very
substantial response, 800 different submissions both on behalf of audiences and
the industry, and a series of meetings with stakeholders. Out of that came some pretty clear views
which my colleagues who sit on the committee that are undertaking this exercise
have taken very seriously. They need to
provide some more information before we can be satisfied that consultation is
as complete as we feel it needs to be in the areas of technical standards of
Canvas, the way in which the BBC will work and cooperate with industry bodies,
the exact proposals for control of the electronic programme guide, the
governance arrangements for the joint venture, and the use of editorial
controls. The stage we are at at this
moment is that the Executive have been asked to bring forward more information
in each of these areas and that is in preparation. We expect to receive it in the very near future. This first phase of consultation will then
be extended to allow people to respond to that extra information. The Trust will then reach, and this is an
established procedure now, its provisional conclusion and then again consult on
that provisional conclusion before it reaches its final position.
Q99 Paul Farrelly: Clearly Freeview was a phenomenal success
without which many of us, including myself, simply would not be watching
digital TV today before switchover.
Could you just remind the Committee of who your partners are in Canvas?
Sir Michael Lyons: Perhaps I should hand over to Mark because
they are his partners.
Mr Thompson: The initial partners have been ITV plc and BT
plc, although I want to say the intention behind this project is to garner as
wide support as possible amongst broadcasters, ISPs, the key consumer
electronics companies and so forth.
Subject, of course, to the approvals process I would expect by launch
there will be other broadcasters, other ISPs and other players involved in the
project as well.
Q100 Paul Farrelly: The scope of the project has long been a sort
of Holy Grail almost of the industry to deliver this sort of service through a
television set.
Mr Thompson: If I may say so, Mr Farrelly, also, rather
like Freeview, providing a very simple, clear proposition which the public can
understand very readily and where, if they buy a product which meets this
standard, they will have a very high level of expectation of plug and play, of
it working immediately and delivering a very simple, clear, easy to use
service. Manifestly, alongside things
that other people are doing as well, this is potentially quite an important
piece in the jigsaw of boosting, as it were, the voluntary take-up of broadband
in the country towards that goal of universal broadband.
Q101 Paul Farrelly: So far as you are aware, are there any rival
similar projects out there in the UK today?
Mr Thompson: There are absolutely a number of different
products and multiple, almost myriad, ways of potentially trying to plug up
your TV to the Internet. It is quite
important to say about Project Canvas that what we are trying to do is to set a
standard, indeed a minimum standard, although there is no reason why people
could not meet the standard and add more functionality or more proprietary
products or services to any box they create.
The BBC would not be making boxes itself or trying to make money out of
making boxes, this is more about trying to set a standard which then means you
have got something which the public can learn about very readily and then
potentially promote take-up in the way that we believe Freeview, Freesat and, although we found it
slightly harder, DAB have done already.
Q102 Paul Farrelly: One of the concerns if we look at the pay TV
market, which Ofcom is now looking at again, is who controls the
interface. One of the concerns that
seems to have bubbled up is whether the BBC's position is such that it will
control the interface in whichever way you wish to interpret that. Maybe the analogy with Sky is not perfect,
but you understand where I am coming from.
Sir Michael Lyons: It is quite properly an issue to be tested in
this exercise. I think it is fair for
me to say that if you look at the vision, put to one side the proposals for a
moment, and the potential contribution this can make to audiences and, indeed,
business activity in the country, the contribution it might make to dilemmas
over regional and local news, very exciting, look at the proposals of the BBC,
they have to be very carefully evaluated in terms of market impact and that
issue of access and control is right at the heart of that.
Q103 Paul Farrelly: Are these relevant concerns, Mark, or are
they misplaced or overblown?
Mr Thompson: Obviously in an environment where you are
going to be offering Internet protocol television services - slight shorthand -
via a TV style EPG, issues of priority, order and prominence, as they have been
for BSkyB, Virgin and others who are in this area, indeed for people selling
Freeview boxes, are relevant issues. I
do not want to either short-circuit or pre-empt the appropriate processes of
approval, but what I want to say is the philosophy behind Canvas is that this
should be offering people services that the public want in as open a way as
possible, which absolutely means there should not be a bias towards excluding
some services or putting others to the forefront, it should be based on what is
going to work for the public. It
absolutely should mean that big established services, like Youtube, for
example, you would expect to be very prominent on this platform.
Q104 Paul Farrelly: The BBC's position is rather different as the
custodian of the public and the licence fee payers' interests from, for
example, BT, another major corporation but which is a public limited company, a
private enterprise. How will you
resolve in your considerations any tensions between the two standpoints?
Sir Michael Lyons: I am going to resist the temptation to be
taken into the process other than to acknowledge these are legitimate questions
to be asked and answered in the evaluation that is currently taking place. Just let me take the opportunity to show
that the Trust has become quite accomplished at understanding the distinction
between the purpose and the proposal.
If you look, for instance, at the last PBT exercise that we had to take
a look at, the proposition of local video, despite the fact that we were very
clearly aware of a very strong audience desire to have more local news, the
proposition in front of us was not right.
I only cite that to give you a bit of confidence that what my colleagues
are doing here is working their way through these very issues to ensure that,
of course, there are always likely to be some competitive concerns but how do
they balance against the public value that can be achieved.
Q105 Paul Farrelly: In terms of timing, what is the next stage
with Canvas in terms of the product itself and your own views and your review?
Sir Michael Lyons: Literally, the next stage is we will receive,
and I think this is a matter of a short number of weeks, probably two or three,
the information we have asked for from the Executive, the more detailed
information under the headings I have shared with you. That will be published and there will be an
extension of the current consultation exercise for people to have a chance to
digest that information and submit further views. At the end of that point the Trust will establish, absolutely in
keeping with its established process, its provisional view on whether it can
approve the service or not, and which conditions it might want to attach to the
service if it is approved, and then there will be a subsequent short period of
consultation because we have found that so valuable in the past for actually
adjusting the dial in the final approvals.
I cannot tell you, and it would not be right to, where my colleagues'
minds are on this matter, that is quite properly for them to be reflecting on.
Q106 Paul Farrelly: Can I just move briefly on to BBC
Worldwide. I say "briefly" because I am
sure that you will want to amplify your response in due course to the report
that we made. I have only just seen a
photocopy of the Worldwide review that has come into the Committee this
morning, but both in your report and Worldwide's it seems the controversy about
Worldwide has just passed everybody by at the BBC, it is not mentioned or
referred to as if there were no issues about BBC Worldwide.
Sir Michael Lyons: I do not think I feel it has passed us by, if
I can say that. I sit here with this
being one of a small number of areas of frustration. You know that we started a review of BBC Worldwide that was
motivated both by public controversy about market impact and our own concerns
about protection of BBC brand reputation and intellectual property rights. All of that in the context of recognising,
and forgive me for repeating this but it is important, that since 2004 we
believe Worldwide has been run as a vigorous business and has brought back very
considerable benefits to licence fee payers, both in terms of investment in
programmes and also contribution to the BBC's budget. We have been frank with you that we believe there was a case for
tightening the shareholder expectations of Worldwide, being clearer about the
focus on contributing to the BBC's public purposes, being clear about the focus
on BBC intellectual property, and having a rather less permissive regime for
mergers and acquisitions. To some
extent, what I think you see reflected in Worldwide's Annual Report is that
some of this, even though the review has not yet been formally completed, has
actually been taken account of in Worldwide's thinking in the last year. I stand by our decision that in the light of
first the Ofcom document pointing to the possible role of BBC Worldwide in the
future of Channel 4 and subsequently Digital
Britain, which is a rather complicated document and apparently pointing in
more than one direction at the same time in its attempt to look at some issues
here, both raising the position of a nascent global rights organisation as well
as coming back to the issue of a connection between 4 and Worldwide we felt that
it was not the right time to try to conclude this exercise. In the document we have submitted to you we
have tried to be as frank as possible about those points on which we believe we
are completely agreed with you and those areas where at the moment we are not
completely congruent, but there is a clear undertaking in that letter that as
we complete this exercise we will bear your views in mind and reflect further
on those issues.
Q107 Paul Farrelly: Lonely
Planet was a lightning conductor for some of the unease and was a different
sort of event in the history of BBC Worldwide in terms of the size of its
acquisition, and you paid one hell of a price for it. I am just looking through the notes. Most of the price was stated to be for the books business, but the
books business has been clobbered really looking at its profitability. At the time when we were talking to you, Sir
Michael, during our report you said that you had yet to come to a view as to
whether that price was justified. Have
you got any further on that?
Sir Michael Lyons: The Trust's line right from the beginning was
we believed this had been carefully scrutinised, both by the Worldwide Board
and the BBC Executive, and that it represented a proposition for which we could
see the potential value. The whole
purpose in securing Lonely Planet was
to find a way of exploiting existing BBC IP in the areas of travel and related
matters. We could see that was a
proposition with some validity. We
could see that this seemed a reasonable price to be paying for the
organisation, but we approved it wanting to see very clearly demonstrated both
that it did lead to the exploitation of BBC IP and that it generated a proper
return. I think it is fair to say that
our position is still one of waiting to see this fully evolve. This has been a difficult market to develop
the business in, but progress is being made.
Do you want to say more?
Mr Thompson: Our view about the progress of the business
itself would be manifestly the global downturn, and in particular its impact on
international travel and tourism, has had an impact on the core book
business. We think it is doing well
benchmarked against its rivals, it is performing well. Lonely
Planet magazine has launched in many markets now and is doing very
well. We have already seen a big
increase in the traffic to the website and we are launching a more
sophisticated, more interactive version of our website this autumn. The underlying progress in restructuring and
reorganising this business, and also, above all, trying to make sure we are
demonstrating the point that BBC IP, BBC archive programmes and other forms of
BBC IP, can add value to this business is going well. If you have not seen it I will send you a copy of the
magazine. I think you have got to read the
magazine to see the extent to which we are trying to leverage BBC IP.
Q108 Paul Farrelly: I have not actually seen a recent copy but I
did see one of the first copies.
Although I say it seems controversy had passed you by in your report,
---
Mr Thompson: Both the Chairman of BBC Worldwide and the
Chief Executive do refer to the Select Committee's review.
Q109 Paul Farrelly: I have only had a photocopy this morning, we
have not got a full copy of that review.
When I saw one of the first editions of the Lonely Planet magazine there seemed to be an implicit recognition
that it was a bit controversial because I could not find "BBC" anywhere and I
had to look inside on page two or three in the small print as to who it was
published by. You say you are damned if
you do and damned if you do not, but it seemed an odd way of leveraging the
BBC's IP not to have the BBC logo displayed prominently.
Sir Michael Lyons: I have read the magazine and personally I
think it has improved significantly since its launch. There is no shortage of BBC talent included in that magazine.
Q110 Paul Farrelly: I did not see "BBC" anywhere. Maybe it has changed.
Sir Michael Lyons: Can I just come back to your point as to
whether this was overlooked in the Annual Report. Given the difficulties of not being able to conclude the review,
we have been judicious in our references to this. It is very clearly flagged up on page 11 that we began the review
in July 2008, so no coyness there.
Q111 Paul Farrelly: I do not want to join Philip in this sort of
approach. Can I put a technical
question to Ms Patel. There is no
mention of acquisitions in the footnote regarding the outstanding 25% which is
under option for Lonely Planet. That is under option to October this year,
is it not?
Ms Patel: Under option until October 2009.
Q112 Paul Farrelly: It
has not been exercised yet?
Ms Patel: It has not been exercised as yet, no.
Q113 Paul Farrelly: But you expect it to be?
Ms Patel: We are still in discussion with the
Wheelers. They are very happy with the
way the business is running so we do not expect them to exercise it, but until
we are through to October 2009 ---
Q114 Paul Farrelly: They have a fairly short period in which to
exercise it.
Ms Patel: Yes.
Q115 Paul Farrelly: It would be a no-brainer for them to wish to
cash in, would it not?
Ms Patel: Do not forget, the Wheelers are involved in
the business as well, it is still something they are interested in. They could have exercised the option at any
time from 1 April this year; they have shown no sign of exercising that so far.
Q116 Paul Farrelly: My final question is there was a report at
the weekend - these things come around - regarding a potential spin-off IPO
flotation of BBC Worldwide. As part of
any review to value the organisation, for instance for the purposes of any
possible combinations with Channel 4, you might expect not only a valuation but
the valuation could be for different purposes as part of, "Well, if we are
doing this, we might as well look at all these scenarios". Is it a case of people getting the wrong end
of the stick or is a flotation a possibility?
Sir Michael Lyons: Any organisation owning a subsidiary business
will always have an open mind as to whether it is in the interests of its
shareholders that it retains that business or it sells it, and the BBC is
absolutely no different here. There is
no active plan at the moment, far from it.
There have been discussions in the context of Digital Britain and there are questions to be answered there. The BBC, both at Trust level and Executive,
will be focused on what is in the best interests of licence fee payers. One point I would want to add just because
of the public controversy around this is there have been some rather simplistic
views of if you were to be interested in the role that the BBC might play in
the development of an independent UK rights organisation. Let me say now, for the record, that the BBC
would be absolutely certain in any future scenario that it held very firmly on
to the rights associated with its intellectual property and its brand. The notion that you just - some have used
this term, have they not - free BBC Worldwide, it would be a rather different
company from the one we have at the moment.
There is absolutely no plan.
Q117 Paul Farrelly: No discussions with Government on that?
Sir Michael Lyons: No discussions other than we are properly
having to respond to the questions raised in Digital Britain and we are trying to do that as openly and frankly
as we can.
Q118 Chairman: A couple more questions. You mentioned Lonely Planet and you will recall, or you may be aware, that when
we were taking evidence about Worldwide extreme concern was expressed by the
publisher of Wanderlust, which was an
existing travel magazine, and we were assured by BBC Worldwide that they would
be very, very different publications.
Indeed, I asked John Smith: "It is your assurance to us that when the Lonely Planet magazine appears it will
look very different from Wanderlust",
to which John Smith said, "Yes". This is the December 2008/January 2009 edition
of Wanderlust, "100 greatest travel
secrets". This is the July 2009 edition
of Lonely Planet magazine, "Travel
secrets. 50 reasons why you must
read". It is the contention of Wanderlust that they do not look very
different at all, that the BBC have entered a market which was already being
well served and they are having a severe detrimental effect on an existing
commercial publication.
Mr Thompson: If you open he covers of those two magazines I would put it
to you they are significantly different magazines. The fact that in the world of travel magazines sometimes broad
headlines or organising principles occur I do not think really makes the
point. Lonely Planet is broader spectrum in its range and the target
audience in terms of the kinds of holidays that are covered. My reading of Wanderlust, and I have to say I have not read those particular
editions of either magazine, is it is a rather more specialist piece of
work. If the publishers of Wanderlust have got concerns about it
they should come straight back to us and I am very happy to see them or to
suggest that John sees them to talk about concerns they have.
Q119 Chairman: Thank you, because they do and I think they
will want to take those up. Paul said
we had done Kangaroo to death but I just want to ask a couple of
questions. You will be aware that the
Committee last year expressed some concern about the amount of time and money
committed to Kangaroo. You wrote to me
but said you will be giving a full response and we have never had it.
Sir Michael Lyons: Forgive me, I thought as we prepared to come
and see you again this year that we had satisfied ourselves that we had
discharged all of our responsibilities and you were satisfied. Can I just give you an undertaking that we
will fill that gap as a matter of urgency.
Q120 Chairman: Thank you.
You had originally told us that the Trust had authorised preliminary
talks about Kangaroo, yet the consequence of that is that this year you are
writing off £9.1 million. That seems an
extraordinarily large amount of money for talking to other players in the
industry, which was what you had told us had happened.
Sir Michael Lyons: Let me give the Director General a chance to
say a little bit about the stage of development and the investment that is
involved there. I still think the
Trust's position was the right one. It
is very difficult to get the regulatory alignment right here. Our view was very clear that if there were
competition issues to be considered it was appropriate the Competition
Commission should have the space to make those decisions before we discharged
our responsibilities. Clearly, the BBC
is right to continue to explore how it can meet public aspirations. The desire to give people greater choice,
reflected in the Kangaroo proposition, continues to be a motivator for the
BBC. I do not think that I would want
to get to a stage where we were so anxious not to take risks, but quite the
reverse, that people were discouraged from bringing forward new ideas.
Q121 Chairman: You gave limited authorisation to conduct
talks about Kangaroo. That has resulted
in a £9.1 million loss to the BBC. Are
you satisfied that is acceptable?
Sir Michael Lyons: I think the short answer to that is we have
not finished our discussions about that sum of money. I am very happy to come back to you when we have finished those
discussions.
Mr Thompson: Firstly, on the matter of substance, it is
worth saying that one of the reasons you will have seen from the Worldwide
review is that Worldwide's turnover has gone over a billion pounds, and,
indeed, Worldwide gained a Queen's Award for Enterprise for International Trade
in the current year. This is a
successful company, partly because it has invested and taken commercial risks
to build its business, and manifestly it is a business which has been
built. To my knowledge, the Chairman is
quite right about the sequence of events, the decision taken that the
competition authorities, first the OFT and then the Competition Commission,
should consider this work. The
necessity, therefore, to get the proposal to a level of precision so that the
competition authorities should consider it properly meant substantial work was
done on Kangaroo before it got to a point --- Project Kangaroo became Project
Roadkill before the Trust managed to consider it fully. We are talking here about money spent and
invested by our commercial subsidiary rather than direct use of the licence
fee. My recollection, and we can certainly
write in more detail, is that at each stage of the process there was full
disclosure to the BBC Trust of what was going on and, moreover, that this
expenditure took place within the controls of appropriate financial and other
conditions which are set up for our commercial subsidiary where there is an
understanding that sometimes Worldwide will take commercial risks to build its
business. They have to be tested,
approvals have to be sought, but it is not inappropriate that an amount of
money should be spent on a new project which, had it been successful, could
have potentially delivered very large revenues and a very high return back to
the licence payer.
Q122 Chairman: It is a question to what extent it was
authorised to spend.
Sir Michael Lyons: There is no inconsistency between the two
lines we are offering here. I am not in
a position to give you a full answer on that today, but I will be.
Q123 Mr Watson: If you recall, Sir Michael, Mr Davies drove
his politically incorrect horses through my questioning of you about BBC
Online. Just going back to last year's
report and the Committee's inquiry, at one point you said there was
insufficiently strong management control over bbc.co.uk and a wider concern about how the Beeb marshals its web
assets. How confident are you that
situation is changing?
Sir Michael Lyons: That view was based on the work that the BBC
Trust had done in its very first service licence review, that for bbc.co.uk. It was a very significant exercise for the BBC because it exerted
a discipline to be very clear about the content costs associated with online as
a service which had grown up out of an organisation that had previously
produced content for radio and television, so it was a defining moment. It got characterised in the press as if this
was out of control, but what it was, of course, was a moment of saying, "We now
need to be very clear precisely about the costs associated with this service"
and that was the discipline that the Trust brought to it. My answer to your specific question is that
the last year was a year of very considerable progress and everything we have
seen makes us confident that this matter has been seriously addressed in terms
of proper budgetary control and, what is more, clear accountabilities and
leadership. We have made progress. It is a complicated and growing area of the
BBC's activities, so it is very much work in progress. No, I am not giving an open cheque here, you
would not expect me to, but the Trust is satisfied that the very clear
recommendations of the service review were taken seriously and acted upon with
energy.
Mr Thompson: The management challenge here is that the BBC
has historically organised its spend against services in fairly straightforward
vertical silos. BBC2, you can see what
goes on in BBC2. The Chairman raised
the question about how you ascribe value around repeats, but essentially linear
services have been run as discrete silos.
bbc.co.uk sits across the
entire BBC and much of the BBC contributes to it. It is putting appropriate financial and management controls in
place so we understand precisely, at a time when, to be fair, people around the
BBC are constantly thinking about inventive new things they can do, very much
to your own point earlier on, any proposal to add value and, therefore, to add
value to the website.
Q124 Mr Watson: Just to tease you a bit on creative content
and how you manage that, how you assess and incentivise creative content. You have got BBC TV, you have got BBC Radio,
why do you not just have a third tier, BBC Web?
Mr Thompson: It is interesting. Five years ago that was the psychology about the web, it was a
third service. For millions of people
every day the web is a way in which they get BBC Television and Radio. The iPlayer and streamed radio services are
on the web but they are television and radio.
You cannot distinguish clearly any more between what is television, what
is radio and what is the web.
Q125 Mr Watson: My concern is that you have migrated, and
done it very well, a fabulous amount of radio and TV content on to your web
platform, but you have not quite got new and inventive ways of doing creative
content using the web alone. iPlayer is
your great success this year, it is unbelievable and has brought the BBC alive
to probably new audiences, but I do not quite know how you celebrate success in
getting some of these small start-ups which can come up with whacky ideas that
become mainstream?
Mr Thompson: We are working with them. We are winning multiple awards for our
interactive and web content more than any other broadcaster. Should we do more? Yes. I would be delighted,
if Members of the Committee wanted me to, to come back with some forward
looking strategy about areas like knowledge building, science, history,
culture, where we are trying to embrace pure web content in a way which perhaps
we have not done in the past.
Q126 Mr Watson: My colleagues will think this is a slightly
cranky question, but in your report you mentioned that you have made great
progress in linking to external sites from BBC Online.
Mr Thompson: Yes.
Q127 Mr Watson: Is it still the case that the average BBC net
user only clicks on an external link once every three months?
Mr Thompson: No, I think it is more frequent than
that. I can come back to you with
stats.
Q128 Mr Watson: The idea that the BBC is the UK's trusted
place on the web and that you would use that web presence to signpost citizens
to other sites is now ---
Mr Thompson: It is very important to us. We are doing many more external links than
we used to. We deliver very significant
traffic to all of the major newspaper sites.
One of the main ways people find The
Telegraph, The Guardian, The Times online is via the BBC
website. We want to develop that
further. The idea comes from sharing
the iPlayer so that from the iPlayer site people can find great content from
other broadcasters.
Sir Michael Lyons: Just to underline, which I am absolutely sure
you recognise, some of the difficulties here of both being ambitious but also
being careful not to have inappropriate market impact. One of the decisions that the Trust made was
to demand that the web-wide search from bbc.co.uk
be removed. I know that has caused some
frustration in some areas but that is a very clear illustration of trying to
get this balance right, both being a way of encouraging people to access but
not being too market dominant. It is
quite a difficult balance to strike.
Q129 Mr Watson: I think people can use other search engines
to find content, but you giving links to other bits of content is very helpful
to the user.
Sir Michael Lyons: It is a balance we are trying to strike.
Q130 Mr Watson: Could I just ask about progress on Greg
Dyke's commitment in 2003 to have the entire BBC archive available for creative
reuse.
Sir Michael Lyons: This is what I call a big and ambitious
commitment and it takes a bit of time to deliver.
Q131 Mr Watson: How are you doing on it?
Sir Michael Lyons: In the early promises that are made the
actual delivery is not always as fully addressed as it might be. This is one of the most ambitious things the
BBC is working on at the moment. The
Trust is properly excited by what we have seen and the progress that has been
made. We formally approved the current
stage of work at our meeting yesterday.
Q132 Mr Watson: Good.
Sir Michael Lyons: It is a massive project.
Mr Thompson: It is one of the two or three biggest things
the organisation is thinking about now and we are actually doing it in a
practical way. In a sense, iPlayer and
focusing on catch-up as the first stage of extending back from the broadcast
window occupied us for a few years, trying to work out what was the right way
of doing that. iPlayer is a very simple
interface but the business of getting the conveyor belt of all the content on
to the iPlayer was a non-trivial thing for us to do. We are now looking hard at a progressive rollout of the archive with
still that vision of essentially getting everything ultimately up there. There are some technical challenges for
us. There is quite a big issue, which
will be dear to the Committee's heart, about how you do this as between what is
paid for by the licence fee and what is, as it were, commercially exploited in
ways which work for rights holders, so people who have made great content for
the BBC, writers, performers, independent production companies, can actually
see long range revenues from that content, but do it in a way which does not
have an adverse market impact on other players. As it were, if the BBC was to tip its entire archive up onto the
web tomorrow there is a danger that you would blow other businesses out of the
water. Trying to find the right way of
getting that balance right and also thinking quite hard about the boundaries
between what is made available on a commercial basis and as part of the BBC's
public service mission, I would say we are at a point where we have got quite a
clear roadmap at a high strategic level, we have got some early thoughts about
how to operationalise that and make it happen.
As Sir Michael said, we had another briefing and, indeed, approval from
the Trust yesterday. I think it is
going to be one of the biggest things we do in the next two or three years and
I am very happy to keep the Committee informed on our progress.
Sir Michael Lyons: One of the things we will be watching very
carefully in this as well as the market impact will be to ensure that we do not
end up with the perverse situation where investment is going into bringing
online programmes shown in 1974 at the cost of programmes being produced in
2009.
Q133 Mr Watson: So you need to develop your own revenue
models, you have got to work that out.
Is that very close?
Sir Michael Lyons: I do not think it is ready for public
exposure at the moment, but the work is going on and it is heartening. Let me just underline the Director General's
offer, that as soon as we are in a position to share thinking on this we will
include Members of this Committee.
Mr Thompson: Two other thoughts. One is the public themselves may well have a role in helping us
to find and recommend the content in there.
It is the public who know more about our content in some cases than we
do. Secondly, this is a big area for
partnership. We have signed, for
example, an MoU with the BFI to try and work with them to get their archive up
there. I talked about the example of
the Francis Bacon exhibition. Other
people may well be able to do something with our archive and bring it to the
public for a particular project. The
other thing you will see is new alliances building up. These archives, and certainly the BBC
archive, are national assets and exploiting them, making them available for
education but also for entertainment, is going to be a big part of the future I
think.
Q134 Mr Watson: Would you go so far as to say it is the most
culturally significant archive in British history, as many have said?
Mr Thompson: I do not want to make it sound ludicrously
vainglorious. It is clearly one of the
big collections and, oddly enough, in areas which you may not necessarily
immediately think of. We think we have
the largest sheet music archive in the world, for example.
Mr Watson: Fabulous.
Chairman: It has been a marathon session, thank you for
your patience. There are several areas
where you have said you will come back to us and there are one or two areas we
might wish to follow up. Thank you very
much.
