Future for local and regional media - Culture, Media and Sport Committee Contents

Written evidence submitted by STV


  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.


    — 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.


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.








  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.


    — 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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