Written evidence submitted by STV
INTRODUCTION
The CMS Committee has launched an inquiry into
the future for local and regional media. STV welcomes this further
focus on the future for regional and local media at this critical
time for Digital PSB.
The CMS Committee seeks views on its broad questions,
and we provide them below. The Committee will also investigate
other areas of interest during the Inquiry, and STV would very
much welcome the opportunity to give evidence at this critical
time for local PSB delivery in digital Scotland, and to update
the Committee with our views on news provision at local and regional
level, and how it should be funded. Discussions are at a key point,
and we would propose to update the Committee in advance of our
attendance with a further written submission. In the meantime,
we provide background below on our business and operational initiatives
as a national, regional and local PSB broadcaster across Scotland.
STV holds the two regional Channel 3 licences for
central and north Scotland branded in Scotland as "STV".
We have been the commercial PSB broadcaster for Scotland since
1957. STV is a trusted brand with a connection to the Scottish
audience and community reaching back over 50 years. However, in
the age of acceleration of technological developments towards
convergence, collapse of traditional business models and transformation
in consumer behaviour, STV is focused on the future not the past.
It is an accepted principle that PSB has to
extend beyond traditional linear delivery to new platforms for
maximum reach and impact. That is borne out by the conclusions
of Ofcom's Second PSB Review and is a theme continued in the interim
Digital Britain report (due for final publication mid June 2008).
This principle has its roots in recognition at European level
that audio visual media policy must keep track with the digital
revolution with regulation updated where appropriate. Current
PSB models have to embrace convergence (of which Project Canvas
is a compelling example). The delivery platform will become an
irrelevance.
We remain committed to the role of commercial
PSB for Scotland with three key objectives:
(i) business sustainability;
(ii) expansion of our PSB remit onto new digital
media platforms, and thus enhancement of our service to viewers;
and
(iii) a relevant schedule for the people of Scotland
and our advertisers.
Our record shows pro-activity on each of the
above, and demonstrates hard work innovation, as well as commitment
to promoting talent, skills and employment within Scotland's creative
industries. See Appendix 3 for the contribution we already make
to training and employment and includes plans to provide training
internships for two students each year in News and feature making
programming.
STV steps to position itself for growth:
— Firstly, we took dramatic steps even
before the economic downturn to rejuvenate and strengthen the
business through the disposal of non-core assets, the reduction
of debt and re-financing. We subsequently met our financial targets
for 2008, and delivered 10 out of 12 of our publicly stated KPIs
(see Appendix 1). Our steps were aimed at positioning the company
for growth, and the transition to digital, but they will serve
us well in the economic challenges ahead.
— Secondly, we acted early to embrace technological
advancement, and in January 2007 we took advantage of the flexibility
of the DTT system and invested in split news offerings to deliver
four new local news services for our viewers, and made them available
on line. That was an early contribution by STV to dual-delivery
PSB just as Ofcom was injecting stimulus into industry thinking
with its PSP call.
— Online activity saw STV launch a new
video site in July 2008 with a world renowned IT partner. Our
website has seen growth of c 400% measured by visitor numbers
over the past year. We now reach some 0.75m unique visitors every
month, and this number is continuing to grow in line with our
expectations. Our aim is the creation and distribution of rich
digital content to migrate viewers to new platforms, and to maintain
and strengthen the connection with our audiences and advertisers
in a digital Britain. Even in these challenging financial times
we have invested in new commercial online services (including
within the classified market at national and local level throughout
Scotland) thus embracing PSB within a commercial framework.
— Online, during early summer 2009 we will
launch four city sites covering Glasgow, Edinburgh, Aberdeen and
Dundee. These sites will deliver a mix of rich local information
around news, sport and entertainment allied to excellent functionality
to source classified jobs and local directory services. Over time
we have plans to add other commercial services such as homes,
auto sales, dating. We intend to launch a series of further, more
granular local sites later in the year covering the next largest
population centres across Scotland. STV will use leverage the
news opt outs in the news broadcasts to promote the localised
city news available online. Promotion of online offerings is key
to their "discoverability".
— Thirdly, we have forged ahead with our
strategy to create a relevant broadcast schedule, staying with
the ITV network on the rich quality offerings (whether national
news, peak entertainment or key sporting events) which should
rightly inform, educate and entertain the whole nation, but opting-out
to place our investment elsewhere where we can offer Scotland
its own content. This presents us with a real opportunity to strengthen
our links with audience (old and new) and advertisers alike.
STV AND NEWS
— We believe regional news for Scotland
is a key component of PSB. In a devolved nation, plurality of
news supply is fundamental for democracy. — Regional news
from STV has shown a rising share over the past three years (dating
from the launch of technology-enabled localised services). We
deliver plurality alongside the BBC in Scotland, with our news
opt outs offering more local coverage than the national BBC broadcaster.
See Appendix 2.
— STV is committed to ensuring relevant
news and local coverage to Scottish viewers, including those who
are migrating to new platforms. In the age of media convergence,
it is a commercial imperative for PSB broadcasters to follow the
migration of viewers to new platforms, both to enhance the viewer
experience with programme related web-support material, and to
provide that increasingly localised focus which an interactive
digital offering can provide. The provision of localised multi-platform
services is a natural progression for STV, and is a huge opportunity
with the BBC Trust's refusal of approval to BBC local video services.
Unlike the BBC whose output over the years remained resolutely
national, STV in particular (given the remote geography. We were
delighted that the playing field was kept level and BBC's proposals
for local video services were not approved. Ofcom's market impact
assessment (published 21 November 2008) concluded that the launch
of BBC local video services would have significant negative impact
on future innovation in online local news, sports and weather
services by the commercial sector. Unlike the BBC whose output
over the years remained resolutely national, STV in particular
(given the remote geography of the regions it serves), and (due
to its historically federal system), has long been committed to
localised services in its output.
— However, in Scotland, PSB in the form
of regional news providing plurality is at a critical juncture.
As Ofcom's Phase One PSB Report confirmed in early 2008,[32]
regional news remains a viewer priority, and plurality of news
provision particularly important. Ofcom noted further in its Phase
Two Consultation Document that "Channel 3 has a symbolic
value in the devolved nations, beyond its PSB provision, and is
seen to represent national identity in ways which other TV channels
do not".[33]
However, Ofcom recognised that the licences of the Scottish Channel
3 licensees would be the first to go into deficit—and they
are now in fact in deficit—with the cost of news alone exceeding
the benefits of public service broadcaster status. Consequently—even
before the economic downturn—Ofcom highlighted the need
for direct funding to preserve plurality and indeed that it was
a "need to be considered in Scotland ahead of other parts
of the UK".[34]
— With the further financial pressures
of the economic downturn, the news provision which STV can offer
will inevitably have to be reduced to counter the downturn unless
there is intervention in the form of direct funding.
— STV does not want to take this step of
reducing its news offering, and is highlighting with urgency the
need for direct funding. STV spends £7 million per annum
on its regional news.
— STV recognises the moves towards direct
funding as a necessity to protect plurality, and to provide news
and local richness. STV welcomes updates from the European Commission
who are currently consulting on new Guidelines for the Application
of State Aid Rules to Public Service Broadcasting.[35]
The Commission considers that public service broadcasters should
be able to use the opportunities offered by digitisation and the
diversification of distribution platforms on a technology neutral
basis to the benefit of society. The Commission concludes that
state aid can be lawfully granted to commercial PSBs provided
there is a clear public service remit; that the monies are applied
transparently: the funding is proportionate to the costs of production
and delivery, and there is no cross-subsidisation of commercial
activities.
— STV recognises the drive towards contestable
funding for regional news and the move towards Independently Funded
News Consortia. These are moves to be explored and developed but
with the clock ticking time against the ability to sustain plurality
with a small economic base, the short term solution has to be
direct funding of sustainable models of quality with a track record
for innovation and embracing technological developments—at
least until models for launching contestable funding schemes are
further developed, likely to be in the course of 2010. That will
leave three clear years of operation of IFNCs prior to the next
key juncture for the future of Channel 3—the year 2014—when
the current licence regime expires.
— Localness is a key component of the future
vision for Digital PSB. Other commercial and community providers
will make an increasing contribution to some parts of the vision
for an information rich digital society, but the most valued material—news—has
to be protected and promoted.
— The United Kingdom is not just one society.
It is multi-layered, and localness and people's desire for localness
is just as strong as ever in the global digital age, and technological
advances are there to deliver it. However, standards, impartiality
in news provision and trusted brands are just as important at
local level than at national level. It is in localness and regionality
that STV adds value.
— We look forward to discussing our views
and initiatives with the Committee, and will provide up to date
written material on the status of our discussions with Government
and regulator in advance. In the meantime, we offer some answers
to the Committee's questions below.
QUESTION/ANSWER
1. The impact on local media of recent and
future developments in digital convergence, media technology and
changing consumer behaviour
Local media has an impact, but it is important
to view the issue from the other side of the telescope—the
importance of the broadcast platform, and a trusted brand to promote
take up on new platforms.
Media literacy takes many forms, and recognizing
that no one behaviourial trend prevails amongst the UK population
is important. PSB and local information has to be promoted and
available to all, but discoverability remains key, otherwise there
will be digital disenfranchisement amongst those generations who
have not grown up with the web and its reach and impact on their
lives.
Online quality is key as far as news provision is
concerned—impartiality and standards must prevail in this
case. Economies of scale could deliver tangible benefits in the
viewer experience of re-purposed, ultra local news. Costs per
minute of production reduce as news output increases. Building
on the success of the micro regional news output that we've established,
it points the way ahead for news provision in Scotland.
In the current climate there is not sufficient
money to pay for quality, original journalism so people turn to
news aggregation sources (and software) to keep the industry alive
by obtaining stories at low cost. Quality must not suffer.
Technology developments mean that we are moving
toward platform convergence—the web—but local media
start from different places and therefore have different journeys
(some of which they may never complete) and they have different
editorial/content/volume requirements.
TV is video heavy, text light. The number of
words in a 30 minute news programme would easily fit on less than
the front page of a broadsheet newspaper. The number of stories
on a TV news programme is probably around 15 per half hour. A
newspaper story and word count is, therefore, much higher. The
print media will have to invest in additional staff and workflows
to move towards video production. TV, for its part, will need
to create more text which will only find its way onto the web.
2. The impact of newspaper closures on independent
local journalism and access to local information
Many sources of information will arise, but
the distinction has to be drawn between information versus journalism.
Without accountability obtained through journalistic work, there
is a democratic deficit. Once it is lost, people have to be relied
on to make their own evaluations and with sources not always impartial,
that will be difficult.
Key is trusted brands who can deliver impartiality,
albeit recognising that access to local information per se will
improve. Market demand and technology will see to that.
Local newspapers produce a very high volume
of local news, broadcast cannot deliver that equivalent volume
online with fewer resources. Basically, news copy has to be created,
paid for and published. You get nothing of value for free or little
cost.
3. How to fund quality local journalism
Only option is to inject public money and to
trusted people who are accountable through their licensed PSB
obligations. We have people on the ground. The other option is
to re-engineer the market local journalism to make it more commercially
successful. However, the issue is that the BBC and its funding
mechanism makes the market unsustainable commercially.
Intervention is therefore key. It is important
never to lose sight of the fact that intervention has been the
route to providing quality TV in the United Kingdom since the
invention of television, and the funding of the BBC.
Then in the Fifties, intervention to offer scarce
spectrum created huge value from the 50s onwards as the commercial
PSB market was established.
Now technological advances have opened up the
digital world, and undertakings can no longer have licence conditions
imposed at cost. In days where the return in terms of access to
spectrum has no value anymore.
High quality local broadcast journalism does
thrive in other countries, not least the US, where the market
is most competitive, but in the United Kingdom, the presence of
the BBC distorts the market and makes intervention to support
plurality inevitable if PSB is to be strengthened and maintained.
4. The appropriateness and effectiveness
of print and electronic publishing initiatives undertaken directly
by public sector bodies at the local level
This has to be seen for what it is—PR
and care must be taken not to ill spend public monies. Let them
inform the public on the services available, but that is not news
delivery and evaluation of it. Indeed it is an important requirement
in a democracy that all public bodies should be held to account.
One such route to do so is through the press, hence the need for
it not to be supplanted at local level by public sector information
services. Local news, if it is to serve the democratic need must
be seen to be independent as well as actually being independent.
Information v journalism. Have to recognise the difference.
5. The role and effects of search engines
and online content aggregators on local media
The market will deliver a deep site to the top
of the list—a trusted brand. Broadly this is positive for
STV. A search engine will surface content worldwide.
The "Aggregation factor" is relevant for
demonstrating the importance of brands: three quarters of news
consumption on STV's web pages are via search engines. One quarter
comes through our homepage. Therefore, the value of brand is important
and creates a significant proportion of traffic on our site. If
brand wasn't important, aggregation sites like Google would deliver
all news traffic and media companies wouldn't bother advertising
or creating homepages.
Natural search represents an objective ranking
of the richest, most relevant sites based on the search terms
inputted.
6. The future of local radio and television
news
The funding of regional and local news is the
key issue to resolve.
7. The desirability of changes to the regulatory
framework for print and electronic local media, including cross-media
ownership and merger regulations
All changes needs to take account of impact and potential
distortion of the market and be preceded by due process in the
form of market impact assessments and other appropriate checks
and balances.
8. The opportunities and implications of
BBC partnerships with local media
Turn it round.
BBC is sitting on a well of content—to be made
available to others. No new value created by it sitting there,
but others could make something of it—a commercial return.
Partnership aspect is a necessary one to encourage these sort
of conversations. It will not create money savings. Need to look
to all options. Need opportunity to draw value from a partnership
with BBC, but STV will do the news and provide plurality. The
Government, however, must pay for it.
Bring efficiencies, Good idea but not much value.
As for actual news output, there is a very low level of overlap
editorially—given different agendas and geographies.
9. The extent of plurality required in local
media markets
STV believes firmly that, for established television
broadcast regions, plurality of editorial offering is essential.
This is a consistent principle behind our approach to sustaining
regional news in Scotland on Channel 3 as a strong counterpoint
to the BBC. Where new markets are being opened up, at a more localised
level and not dominated by individual players, we do not see an
inevitable necessity in contriving plurality. Market forces can,
we believe, be relied upon to provide competition where sustainable.
Only where there is clear evidence of market failure of likely
shortcoming of provision should public funds, such as the BBC
licence fee, be directed towards more localised media.
10. Incentives for investment in local content
BBC is not there below city sites.
Low production costs and low barrier to entry means
that it is a rich ground for competition and innovation. The BBC
should not be allowed to build more localised online services
which would simply strangle this emerging market at birth.
11. Opportunities for "ultra-local"
media services
Again the rise of ultra local is inevitable
with low barrier to entry and non existent production costs beyond
the "sweat of brow" or application of send button. Interest
groups and individuals will drive this and causes will rise and
fall depending on ultra local issues and the make up of the relevant
locality. This is not an area for regulation but is the realm
of the web and a feature of its accessibility and reach.
APPENDIX 1
SUMMARY OF KPIs
APPENDIX 2
STV REGIONAL NEWS PERFORMANCE SINCE [2006]
APPENDIX 3
THE TRAINING DETAIL
STV'S CONTRIBUTION
TO THE
CREATIVE SECTOR
IN SCOTLAND—BY
WAY OF
DIVERSITY OF
OPPORTUNITIES CREATED;
GEOGRAPHIC REACH
AND FINANCIAL
CONTRIBUTION
Creative Media Industries in Scotland are one
of six priority sectors in the Scottish Government's economic
development strategy. The contribution from STV Group is significant
in developing and maintaining the quality of local media provision
in Scotland. STV's contribution ranges from providing employment
in broadcasting, production and digital media; to supporting the
development of the specialist skills required to support the growth
of successful digital media output at a local and regional level;
to providing opportunities through partnering with educational
institutions to ensure a strong talent pipeline and opportunities
for those seeking to work within the creative media industry in
Scotland.
Employment
— During 2007, in addition to our
permanent headcount of 375 staff, we employed over 500 people from
the freelance community. These freelances filled a diverse range
of roles within our Scottish based productions across
both broadcasting and technical disciplines—high-end post
production; commercial production; camera operators; sound and
vision; graphic designers. — In 2008 YTD, over 450 freelance
staff have been engaged, contributing to building and retaining
a strong, talented and vibrant freelance community in Scotland
for the benefit of all in the creative sector including the independent
production sector.
— Through the combination of its freelance
base and its permanent staff, STV Group employs c875 people annually
directly and indirectly, and has contributed over c£30
million directly in salaries and fee income.
Supporting new skills development
— Through the establishment of our digital
strategy and growth of our online business, we have created 35
new roles in web development and digital content creation. —
Additionally, we have brought previously outsourced (and off-shore)
web development functions in-house, creating opportunities to
develop knowledge and strengthen technical skills and capabilities
within the Scottish economy.
Education and training
— STV Group works in partnership with the
education sector across Scotland to provide access and opportunities
and support the development of future talent. During 2008, we
have provided 45 supported places for students and graduates
within Aberdeen and Glasgow. — In March 2009, STV Group
announced a graduate placement initiative providing work placements
for media graduates within STV's News team and Content business
in feature making programming. These structured placements will
create opportunities for graduates to develop their skills and
knowledge which will serve to strengthen the future of local and
regional media.
— We are currently working with the Skillset
Media Academy programme in Scotland to identify further opportunities
for education and business partnerships and the development of
a programme of Continued Professional Development (CPD) opportunities
for freelancers.
May 2009
32 Ofcom's 2nd Public Service Broadcasting Review:
Phase One: The Digital Opportunity, published 10 March
2008. Back
33
Ofcom's 2nd Public Service Broadcasting Review: Phase Two:
Preparing for the Digital Future, published 25 September 2008,
paragraph 5.9. Back
34
Paragraph 9.34 of Phase One. See footnote 1. Back
35
Second Draft Communication from the Commission on the Application
of State Aid Rules to Public Service Broadcasting-published 9
April 2009. Back
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