Memorandum from the BBC Executive

 

Structure of this response

 

Executive Summary

BBC's role in regional and local media

Plurality in region and local media

Market Context

BBC Partnership Proposals

Public Policy Interventions

 

Executive Summary

 

Despite, or perhaps because of, globalisation, local and regional news has proven to be of enduring value to UK citizens. Audiences continue to consume it extensively and value its role in a democratic society.

 

For over eighty years on the radio, fifty years on TV and recently online, the BBC has served the public with independent, impartial and accurate news about their communities. With its news and other Nations & Regions programming, the BBC has supported civic life and public debate across the UK and helped to build a sense of place within communities. This critical role is captured in the BBC's public purposes to 'represent the UK, its nations, regions and communities' and 'sustain citizenship and civil society'. BBC Trust research has confirmed that licence fee payers regard it as a core part of the BBC's public service remit[1] and the Trust has therefore been clear that it must be a priority of the BBC to serve local and regional audiences well.

 

The BBC delivers its purposes through a range of dedicated news output for the devolved nations, English regions and local communities, as well as network news output that provides information and analysis for UK-wide audiences. The BBC has a strong commitment to deliver a range of perspectives and richness of coverage that reflects the diversity of the nations and regions, to a UK-wide audience.


In Scotland, Wales and Northern Ireland, the BBC has sought to reflect the new democratic and cultural needs created by the process of devolution. Across the English regions, the BBC's dedicated services explore the major issues facing local communities and play an important role in the democratic process. The BBC's nations/regional TV bulletins at 18:30 are the UK's most watched news programme; on radio, the BBC offers a speech-based local service to an older audience demographic underserved by commercial local radio in England as well as dedicated stations for the devolved nations: Radio Scotland, Radio Wales and Radio Cymru, and Radio Ulster and Radio Foyle. For the past eight years, the BBC has provided comprehensive online news and information to audiences across the Nations and English regions. Going forward, the BBC remains fully committed to its role in serving local communities with trusted, independent and impartial journalism, and regards this as a core part of its public service mission.

 

The BBC's news provision has been complementary to that of commercial provision, primarily from local newspapers, regional commercial TV and local radio. However, digital economics is now posing major challenges to the business models that have traditionally supported investment in news by these providers. It has been widely noted that structural and cyclical factors are contributing to significant declines in both the circulation levels and advertising revenues obtained by the local and regional press. This has led in some cases to a reduction in editorial staff and investment, with local media groups seeking to make the transition to digital business models.

 

These market developments have thrown into focus the debate over the meaning of plurality within regional and local media in the digital age: a debate in which Government, Parliament, regulators and the industry have all engaged vigorously. While a relative degree of consensus has emerged on what plurality of provision would entail in some areas, such as maintaining two public service competitors in regional TV news, in other areas there is less agreement on the desired public policy outcomes and means of achieving them.


The BBC has also long been committed to plurality to meet audience expectations: for example, where it can stimulate competition for quality, audience choice and act as a democratic safeguard. Diminishing choice and competition in news is not in the public's interest.


There is clear public value in the BBC sustaining investment in news and other content areas that are valued by local audiences, at a time of reduced investment elsewhere at the regional and local levels. At the same time, the BBC must open-up its news infrastructure to support continued delivery of regional news beyond the BBC. This commitment is at the heart of the BBC's partnership proposals. The BBC Trust challenged BBC Management to develop sustainable partnership proposals. In doing so, the Trust stressed that the proposals should support the delivery of public service broadcasting, without compromising the BBC's delivery of its public purposes or its independence, for which the BBC Trust has a Charter-enshrined duty to protect.

 

In response to this challenge, BBC Management has developed proposals. The BBC can act as an 'enabler' of plurality in regional news in the following ways:

 

- co-operate on the 'means of delivery' to reduce unnecessary duplication and the high fixed costs of multiple provision; and

 

- support existing players transition from traditional to new delivery models and reduce barriers to entry.

 

We have a good track record to build on. In Scotland, the BBC's partnership with the Gaelic Media Service (GMS) has seen the successful launch of the Alba digital TV service on Freesat, with the hope that it might soon go onto DTT and cable. The remit of BBC Alba is to serve Gaelic speakers, those learning the language, and those interested in the language and culture. Under the partnership, the BBC supplies news content to the channel. In Wales, the BBC and S4C have collaborated in a successful three-year Strategic Partnership since 2007 and a renewed partnership is in development.

 

To help preserve plurality in regional news, the BBC has formulated a comprehensive partnership offer whereby it will make available - either to ITV plc or, under a new model, to a replacement set of news consortia supplying news on Channel 3 - its own facilities including desk space, studio and gallery time, technology and a common picture pool. The scope of the partnership offer is set out in the joint Memorandum of Understanding with ITV plc. The partnership should be more valuable to new providers of regional news on Channel 3 without ITV's existing infrastructure and cost base. Taken together with the benefit left to ITV from its regulatory assets post-2012, alongside the advertising available for the slots, the total benefit should be sufficient to fund a viable, high quality regional news service on Channel 3.

 

In addition to the BBC's regional news partnership, we are developing a range of options that could help support diversity in the provision of news at a local level. As outlined in our response to the Government's Digital Britain report, we are aiming - subject to Trust approval - to share the BBC online video news content with newspapers. We will provide the rest of the industry with access to the BBC's College of Journalism online training resource from this summer. The BBC is also exploring the scope for partnership with local TV and sharing some BBC local audio content with local community and commercial radio, as proposed by the Myers review for Government. In developing the options, we recognise the need to be sensitive to the potential impact of partnerships on the wider market.

 

While the BBC itself is not immune from the pressures of the current economic climate, it recognises that access to public funding brings with it a responsibility to help the wider creative sector. But the scale of the challenges facing local media means that BBC partnerships should be part of a long-term solution that involves the transition to new business models and the use of existing regulatory assets to support new suppliers of regional news.

 

The BBC's role in regional and local media

 

For over eighty years on the radio, fifty years on TV and recently online, the BBC has served the public with independent, impartial and accurate news about their communities. With its news and other Nations & Regions programming, the BBC has supported civic life and public debate across the UK and helped to build a sense of place within communities. This critical role is captured in the BBC's public purposes to 'represent the UK, its nations, regions and communities' and 'sustain citizenship and civil society'. BBC Trust research has confirmed that licence fee payers regard it as a core part of the BBC's public service remit[2] and the Trust has therefore been clear that it must be a priority of the BBC to serve local and regional audiences well.

 

The BBC is therefore strongly committed to offering high quality, relevant journalism that reflects the issues which are important within a devolved UK. This is demonstrated in our range of dedicated news output for the devolved nations, English regions and local communities, as well as network news output that provides information and analysis for UK-wide audiences. The BBC's investment in the nations & regions across the UK supports a comprehensive range of multi-platform services:

 

Ÿ dedicated news, current affairs and political programming for the nations and English regions. On TV, the BBC's nations and regional news bulletin at 6.30pm is the UK's most watched news programme;

Ÿ 40 local radio services in England

Ÿ 6 nations radio services including Welsh and Gaelic stations

Ÿ 60 BBC local websites plus Welsh, Gaelic and Irish language websites

 

The ability of the BBC's nations/regional TV news to connect with audiences - especially during times of emergency - was recently highlighted with the early February snowstorms bringing 8 million adult viewers to the 18.30 bulletins across the UK. However, reach to BBC's nations/regional news on linear platforms is under pressure as audience consumption patterns change.

 

At the UK-wide level, the BBC has recently put in place a new strategy to improve the clarity, range and richness of its network news coverage of the devolved nations, following a BBC Trust review.

 

Given the challenges to the regional/local media ecology (see below), the BBC's continued commitment to well-resourced, high quality services for the nations and regions is vital.

 

The BBC will continue to aim to deliver news in a distinctive way that complements commercial media. This is, in part, through the nature of its service portfolio and editorial offer. For example, the BBC's impartial news has complemented the strong editorial presence audiences often want from their newspapers; BBC speech-led local radio contains a richer news offering compared to the more music-driven commercial offer; and the BBC local websites , trusted on news, sport, weather and information, seek to link to those provided by local newspapers online. In part, the BBC can complement commercial provision in its target demographic (contrast commercial radio's audience, two-thirds under 45[3] with BBC local radio's specific duty to target older listeners).


The geography of commercial and BBC offers also differentiate their provision. This is evident in the BBC's 60 local websites, serving around 1 million users on average, in contrast to the 1,100 local newspaper websites tending to serve a far smaller "ultra-local" geographic area. It also applies to radio: Ofcom recently concluded that commercial radio stations serve fairly tightly defined areas "which are in most cases considerably smaller" than BBC local areas[4].


It is important that the BBC's approach is sensitive to the wider market while delivering strong public value. The BBC's Local Video broadband plans had been designed to meet audience's desire for improved regional and local services from the BBC, as identified by BBC Trust research. However, the proposal raised market impact concerns in the current climate. Its rejection by the BBC Trust under the Public Value Test framework should give commercial media breathing space in the transition to new online business models. The Trust asked the BBC Executive to respond to the remaining challenges of 'representing the UK, its nations, regions and local communities' with a series of smaller, targeted interventions focused on improving the BBC's existing TV and radio offering for communities across the UK.

 

Plurality in Regional and Local Media

 

These challenges facing regional and local media have thrown into focus the debate over the meaning of plurality within regional and local media in the digital age: a debate in which Government, Parliament, regulators and the industry have all engaged vigorously. While a relative degree of consensus has emerged on what plurality of provision would entail in some areas, such as maintaining two public service competitors in regional TV news, in other areas there is less agreement on desired public policy outcomes and means of achieving them.

 

There remains a strong demand for news about 'where I live'. Overall, over 90% of adults use media to source local information on a regular basis.[5] Among other sources, this usage ranges across regional TV by ITV and the BBC (where each region typically serves audiences of 4million) to city-based local TV such as Manchester's Channel M, from the BBC's 45 local radio stations (typically with a 60km radius) and the c.340 commercial providers to over 100 community radio stations (typically a 5km radius), and from the BBC's 60 Local websites to the 1,100 offered by the UK's 1,300 local newspapers.

 

The UK has a mixed news economy, reflecting different editorial approaches and audience expectations. Channel 3 licensees have supplied commercial TV news to audiences in the nations and regions as an alternative to the BBC. The PSBs' impartial news has complemented the different editorial approach audiences often want from their newspapers. A plurality of content has traditionally been supported by complementary revenue streams.

 

All the research suggests that audiences attach a high value to the availability of a wide range of high quality news sources at the national, regional and local level.[6] The model of competition between the BBC and ITV has widespread public support: three quarters of those questioned in Ofcom's recent research agreed that it was important that more than one of the main TV channels provides nations/regional news.[7] TV news sits alongside newspapers, radio and the internet which offer additional choice often at a more local level. A plurality of nations and regional news suppliers is also an important democratic safeguard. Local media play a vital role overseeing/scrutinising public life and making voters better able to hold those in power to account. Separate news for the nations of Scotland, Wales and Northern Ireland is necessary to reflect their different political institutions and cultural make-up. The new politics that devolution has brought about requires a vibrant, widely accessed media to report and help sustain them both at a nation-wide, and a more local, level.

 

Across virtually all age groups, people's interest in locality and the area that surrounds them has increased significantly over the last two decades, particularly so for those under the age of 45.[8]

 


Figure 1: % who agree that what interests them above all are things that happen in the city or town where they live

Source: Redefining Regions. The Future Foundation (September 2004)

 

This is supported by Government[9] and Ofcom research. [10]

 

The importance people attribute to the 'regional' and 'local' are matched by their active interest in news: audiences continue to consume it extensively and to value it for its role in democratic society.

 

Market Context

 

Despite this continued interest in and use of local media by UK citizens, economic trends are putting pressure on many existing business models and their ability to meet the demand of consumers. Above all, the digital revolution has seen the revenues of traditional media diminish as audiences and advertisers migrate online, while also demanding increased investment to meet new, digital patterns of consumption. These structural shifts are now combined with a severe cyclical downturn in revenue. Although the digital revolution does present some opportunities to providers of regional/local media (e.g. citizen journalism), there is a growing industry consensus that the overall picture is one of real financial difficulty.

 

The continued provision of ITV's regional news is under pressure from a range of factors: growing competition for audiences from multi-channel, the reducing value of analogue spectrum and the current downturn in advertising. As a result, ITV plc has scaled back its commitment to regional news in order to save costs.

 

The BBC also recognises the significant economic challenges facing the provision of English language news media in Scotland and Wales. In Scotland, research suggests people identify most closely with their local area - more closely than with Scotland and more closely than with the UK. Scotland itself has been defined as a 'nation of regions'. In Wales, it has been argued that there is a growing 'information gap' characterised chiefly by:[11]

 

- The high penetration of London-based print media, and a weakening indigenous newspaper market, with only 14% of the Welsh population take a local daily morning paper; 21% take local evening papers and 7% paid-for local weeklies

- The declining contribution of ITV Wales across English language news provision

- The generally poor portrayal of Wales across UK PSB and commercial networks, which the BBC is addressing through a substantial increase in targets for network TV production from the nations.

 

The pressures also exist in Northern Ireland but are perhaps less severe at the moment. UTV itself believes that its news service could be provided on a commercially sustainable basis for the foreseeable future. UTV has recently expanded its news/current affairs output.


Local TV has, to date, seen slow growth and limited provision. Some stations, such as Solent TV have closed (in 2007) and others, such as Six TV and GMG's Channel M have seen profits/operating margins fall.[12] Ofcom is creating more opportunities for local TV by releasing the interleaved DTT spectrum. It may be the case that local news content can also be delivered efficiently via broadband and on-demand platforms[13].

 

In radio as in TV, commercial services, including local stations, have seen revenues fall. Revenues have been declining by an average of 2% per year in the past five years[14] - largely as a result of declining listening hours. This has contributed towards consolidation in the sector and some parts of the industry looking towards a networking model. New digital activity does offer some opportunities to the sector. Ofcom recently forecast that online revenues could more than double to over 45m in 2012/13 and already 57% of radio stations now offer podcasts or on-demand radio.[15] However, new opportunities appear insufficient to offset declining listening and revenues. This picture of the local radio sector is complemented by community radio services. Typically serving an audience over a 5km radius, Ofcom have issued licences for 178 of these 'ultra-local' services, of which 118 have now launched.

 

The impact of the digital revolution and current market conditions on the regional/local newspaper sector has been particularly stark. They are facing a severe cyclical downturn in revenues combined with a structural shift of classified advertising to the internet. In 2003, regional newspapers had over 2bn classified advertising spend - almost five times more than the equivalent spend on the internet. In 2009, it is estimated this figure will have declined to under 1.5bn and will be nearly as low as one-third that of online[16]. This decline has been driven by competition from new market entrants in specialist national classified advertising online, such as autotrader.co.uk, monster.co.uk and rightmove.co.uk. The consequences of the pressures on circulation and revenues are already visible: 60 newspapers closed in 2008 and there were around 900 editorial staff redundancies.[17]

 

The sector has already moved towards consolidation. On a national level, the top 10 newspaper groups account for 90% of regional/local newspaper circulation. At a local level, in many areas the market is more consolidated: Johnston Press has 96% share of circulation in Leeds, Archant has 82% share in Norfolk, and GMG has 63% share in Manchester (along with its TV, radio and local news and information website offers in Manchester). However, in some areas it is relatively unconsolidated.[18]

Against this backdrop of great challenges ahead, there is some evidence that evolving digital offers could offer some future revenue streams to regionals. These include 'ultra-local' websites. Trinity Mirror has launched 30 "hyper-local" websites and Northcliffe's "micro-site" strategy has generated 19 such sites for Croydon. The Hull Daily Mail has 30 journalists available to record video and Johnston Press states it is already publishing 1,300 videos per month on its 323 websites.[19] Ofcom forecast that if regional/local newspapers continue to evolve their offers (including, for example, by more effective targeting of advertisements), they might treble their Average Revenue Per User (ARPU).[20] However, the digital opportunities are very unlikely to compensate for lost print revenues.

 

BBC's Partnership Proposals

 

The structural challenges facing the regional and local media sector will necessitate new commercial combinations and partnerships that were unimaginable several years ago. Public-private partnerships will also have a role to play. The security of licence fee funding, not enjoyed by the rest of the media market, places a responsibility on the BBC to work with others to help create a sustainable future for local media. The BBC Trust challenged BBC Management to develop partnerships to support the wider PSB ecology. In doing so, the Trust stressed that the proposals should create value and so enhance the delivery of public service broadcasting, without compromising the BBC's delivery of its public purposes or its independence, for which the BBC Trust has a Charter-enshrined duty to protect.

 

In response to this challenge, BBC Management has outlined a series of partnership proposals designed to create sustainable financial and other benefits across the broadcast sector and wider creative economy. The BBC can act as an 'enabler' of plurality in regional news in the following ways:

 

- co-operate on the 'means of delivery' to reduce unnecessary duplication and the high fixed costs of multiple provision; and

 

- support existing players transition from traditional to new delivery models and reduce barriers to entry.

 

We have a good track record to build on. In Scotland, the BBC's partnership with the Gaelic Media Service (GMS) has seen the successful launch of the Alba digital TV service on Freesat, with the hope that it might soon go onto DTT and Cable. The remit of BBC Alba is to serve Gaelic speakers, those learning the language, and those interested in the language and culture. Under the partnership, the BBC supplies news content to the channel and makes a contribution to its overall funding. In Wales, the BBC and S4C have collaborated in a successful three-year Strategic Partnership since 2007 and a renewed partnership is in development. Partnerships are an important feature of the BBC's work in Northern Ireland including commissions with other broadcasters (including RTE and TG4) and collaborations on cultural, educational and sporting projects with a wide range of local partners.

 

Over recent months, we have been developing ways to open-up our existing news infrastructure and assets to support provision beyond the BBC. The development of partnership ideas has been shaped by a number of key principles:

 

(i) the BBC's independence, delivery of public purposes and the quality of its news output must be maintained;

 

(ii) they must create value not simply transfer it;

 

(iii) they must not undermine plurality and distinctiveness of news provision; and

 

(iv) they must have sufficient flexibility to enable the evolution of regional/local news as as technologies and audience behaviours change.

 

We also recognise the need to be sensitive to the potential impact of partnerships on the wider market. Any partnership arrangements will need to comply with competition law and State Aid requirements.

 

Sustaining Regional News

To help preserve plurality in regional news, the BBC has formulated a comprehensive partnership offer whereby it will make available - either to ITV plc or, under a new model, to a replacement set of news consortia supplying news on Channel 3 (see below) - a comprehensive range of resources.

 

The scope of the partnership offer is set out in the joint Memorandum of Understanding with ITV plc. We recognise that ITV is now talking about retreating entirely from its regional news commitment. Should they do so, the BBC believes that it should offer the partnership to new providers. We estimate that the partnership could be more valuable to new providers of regional news on Channel 3 without ITV's existing infrastructure and cost base. Benefit to consortia in operating costs is likely to be at least 10 million p/a at full roll-out (this assumes that the BBC charges at incremental cost for the majority of services/facilities under the partnership).

 

The proposed partnership would also enable regional television news providers to access a proportion of BBC's infrastructure and facilities including desk space in the main news centres and local bureaux; studio and gallery time; and production technology. The partnership offer is focused on England and Wales. The creation of large regional news centres could facilitate, over time, the participation of other partners, such as educational, community and training bodies.

 

The partnership would also enable ITV's regional news programmes to share some basic raw material gathered by the BBC's regional news teams. Exclusive stories and features would not be pooled to preserve the distinctiveness of both parties' regional news output.

 

In Scotland, the BBC and STV are currently in discussion about a wide-ranging partnership, including sharing resources, technology and training. The BBC hopes to sign a joint MOU with STV formalising this partnership shortly.

 

BBC Northern Ireland is committed to working with other news providers to secure a cost-effective and sustainable outcome for audiences. Discussions about precise partnership arrangements are at a different stage of development, reflecting UTV's assessment of its ability to maintain its television news programming and the issues which it has identified around resource-sharing with the BBC.

 

The BBC remains of the view that a partnership-based solution is the best way to maintain plurality in regional news, maximising the value of the BBC's long-term investment in infrastructure and facilities around the UK and increasing the efficiency of public investment.

 

Sharing online content and improved linking

In addition to the regional news partnership, the BBC is developing a range of options that could help support diversity in the provision of news at a local level. As outlined in our response to the Government's Digital Britain report, we are aiming to support the newspaper industry via a range of initiatives including syndication of BBC News video online and improved linking.

 

In August 2007, the BBC Trust published the overall BBC syndication policy, stating that 'there will generally be public value in the syndication of content and it is in licence fee payers' interests that content be made available as widely as possible'. Such syndication is not only in the interests of licence fee payers but can also bring benefits to partner organisations.

 

The aim - subject to BBC Trust approval - is to share a sub-set of the BBC's UK video news content with newspaper websites. The content would be embedded in external sites allowing organisations to supplement their coverage with BBC credited material. The intention is for a phased roll-out to UK newspapers in the next few months, before extending the offer more widely to include regional and local newpapers.

 

In addition to sharing content, the BBC should more effectively promote and support online local journalism through increased linking. Ensuring easy access to and 'discoverability' of local content will become increasingly important in a digital age. The BBC should harness the strength and popularity of BBC Online to drive reach and usage of other local content across the internet. Existing links are already generating over one million click-throughs a month to external sites, equivalent to one click-through for every six unique users.[21] We are improving the prominence of external links on the BBC Local sites to other local organisations as well as enhancing 'in-story' linking. Links to 'local papers' and 'elsewhere on the web' now appear prominently on the frontpage of BBC's local sites (e.g. http://news.bbc.co.uk/local/bristol/hi/).

 

The BBC's other online partnerships should also benefit providers of regional/local news. These include the proposal to open-up access to the successful iPlayer technology on a commercial basis and, subject to BBC Trust approval, stimulate the uptake of broadband-connected TV by promoting a standards-based open approach.

 

Enriching the skills base of local media

The BBC's College of Journalism, developed as a comprehensive online resource for internal training purposes, will be made public in the summer. The website includes skills advice, video and guides to all aspects of journalism - from interview techniques to in-the-field reporting. The availability of this editorial training resource will benefit other news organisations and could help lower the barriers to entry for providers at the local level.

 

Partnerships with Local TV and commercial radio

We are exploring which aspects of the proposed regional news partnership could be extended to local TV operators if a sustainable network were to emerge. There is a willingness to share picture material with local TV news operators (as well as ITV) and, subject to capacity constraints, other news infrastructure facilities. Partnerships with the BBC could help reduce barriers to entry for local TV news providers and also create the opportunity for more diverse and differentiated coverage.

 

As suggested in the recent Myers report on commercial radio for the Government, the BBC is exploring, with the industry, the idea of sharing BBC audio content with community and local commercial radio operators - for example, pooling material on diary news stories to reduce duplication.

 

More widely, the BBC and commercial radio have announced a new partnership designed to help secure radio's digital future. This partnership will establish a new forum, the Radio Council, to lead a range of joint initiatives including proposals to develop an online radio player that creates one place for all UK radio to be listened to on the web, and development of a common standard for radio on all devices (mobiles, in-car screens, at-home screens, DAB sets).

 

Acquisition of local news content

The BBC already supplements/complements its UK and international newsgathering operation with text, picture and audio-visual material from news agencies such as Reuters and the Press Association. The provision of core coverage of diary stories and non-exclusive events from agencies allows the BBC to focus resources on its own distinctive journalism. News agencies can also provide access to a wider range of complementary material. Where these tests are met, the BBC will consider acquiring video footage of local news stories from third parties as an input to its own broadcast and online output.

 

The BBC's other partnership proposals will also offer potential benefits to providers of regional/local news. These include proposals to open-up access to iPlayer technology on a commercial basis and, subject to BBC Trust approval, stimulate the uptake of broadband-connected TV by promoting a standards-based open approach.

Public Policy Interventions

Maintaining a plurality of news sources and enhancing quality local journalism should be the priority of public policy intervention. There are a range of options under consideration including:

1. Reform of the regime for regional and local media mergers and cross-media ownership restrictions

2. New models for television news at the regional and nations level

Regional and local media mergers
As regional and local news providers have been subject to greater market pressures there has been a trend towards consolidation of ownership, both within sectors and across the media as a whole. However, a number of regulatory rules governing media mergers at a local level remain. In light of the changing environment, it is appropriate that the Government has asked the OFT and Ofcom to examine the regime for regional and local media mergers and cross-media ownership rules. Key issues for consideration include:

- does the merger regime for local newspapers need to change to reflect the potential for competition for both audiences and advertisers from other media platforms such as the internet; and

- are the current blanket restrictions on cross-media ownership at a local level still necessary? Or does the application of the Public Interest Test to mergers on a case-by-case basis provide an adequate safeguard for maintaining a diversity of voices in local news provision?

Further consolidation in local media could support the ongoing transition of existing groups to digital business models. Subject to protecting competition for audiences and advertisers, consolidation could facilitate the development of stronger, cross-media groups with coherent geographical areas of influence and a critical mass in advertising. At the same time, there is a risk that consolidation reduces the diversity of voices available to the public in a given area/s and that is why there remains a need for a regime that considers the public interest implications of media mergers.

 

New models for regional news

Ofcom has suggested a new model for news provision in the nations and regions based on 'independently funded news consortia' (IFNC). The proposal is that the consortia would have access to the regional news slots on Channel 3 and be integrated into the wider local media ecology. Contracts could be awarded by a national and/or regional tender process.

 

The BBC has had initial discussions with the industry about how its partnership offer would work with the model.

 

Ofcom has suggested that an 'IFNC' replacement for the ITV news service would cost 'in the region of 40-60 million' per annum[22] and has suggested that additional public funding is required. Our initial analysis suggests that Ofcom has underestimated the likely revenues and public assets that are available to support 'IFNC':

 

Costs

 

Cost synergies: IFNCs are likely to bring in other news providers from related media (e.g. newspapers/radio/local TV/news agencies) who could offset some of their newsgathering and production costs across a range of outlets, not just commercial television. The capacity to leverage existing news assets should improve the efficiency of regional news delivery.

 

BBC partnership: The partnership should be more valuable to local media who do not have ITV's existing infrastructure and legacy cost base. Third parties without access to news production facilities/technology could significantly reduce start-up costs as a result of the partnership. All third parties should benefit from access to the BBC's newsgathering operation including local news bureaux, picture material and potentially live facilities. Benefit to consortia in operating costs is likely to be 10 million per annum at full roll-out (this assumes that the BBC charges at incremental cost for the majority of services/facilities under the partnership).

 

New editorial models: if desired over time, IFNCs could develop new, more flexible editorial approaches to regional news that offer greater choice and bring in new audiences[23]. The consortia could, for example, provide a route to more broadband-focused delivery of local news given changing consumer behaviour.

 

Assets / Revenues

 

The new model could have two sources of funding: Channel 3 advertising and existing regulatory assets.

 

Linear television advertising revenues: the consortia could be given access to the advertising revenue that can be generated in and around the slots. If ITV transfers the significant cost burden of regional news to a third party, then there is a case that it should also transfer the value of the airtime and or an equivalent sum.

 

Nations and regions news programmes currently attract a strong viewing share in the Channel 3 schedule, although the revenues earned from regional news are currently constrained by the transfer of advertising minutage to higher performing peak-time slots. Independent analysis estimates that ITV currently earns c16m in advertising from the 6-6.30pm regional news slot[24]. The allocation of the maximum 'average' advertising minutage to the slot could generate c25m pa.

 

Regulatory assets: Ofcom has previously estimated that the value of regulatory assets to ITV - such as access to broadcasting spectrum - is worth c45m per annum by 2012. The assets support public service obligations on ITV; regional news is the largest of these. Ofcom has already suggested in the PSB review that 'part or all of these [assets] could be reassigned at the end of the current licences, to ensure the value of these public assets is being maximised'. Regional news is ITV's most important public service obligation and it is reasonable to argue that a proportion of ITV's regulatory assets should be used to support replacement providers of regional news. There should be a discussion about the best vehicles to do this. One potential mechanism would be to charge ITV for access to its DTT spectrum and use the revenue to support the new providers of regional news.

 

Cross-media advertising revenues: In a changing market, there is a potential revenue upside to the new consortia from selling regional/local advertising at premium across multiple platforms.

 

Under the new model, there are a range of business models that could work and be tailored to meet the needs of different areas. It is important that we avoid a 'top-down', prescriptive approach to the budget and spec of the 'IFNC' as this would allow little room for innovation and flexibility. There should be an opportunity, with third party providers, to assess the most efficient and effective means of newsgathering and production.

 

Based on our initial analysis, it is not clear that additional public funding is necessary to support Ofcom's new model of regional news. The extent to which the new model could be sustainable using existing assets at Ofcom's and Government's disposal, alongside the BBC partnership, must be explored in much greater detail. Taken together with the available advertising revenue in the Channel 3 slots, the total benefit should be sufficient to fund a viable regional news service under the new model. Additional public funding should only be made available as a last resort.

 

The licence fee has been suggested as a possible source of any new funding required for regional news. In the current economic climate there is no guarantee that either the overall level of the licence fee from 2012-13 will be maintained, or that the element currently ring-fenced to aid delivery of the BBC's sixth public purpose will remain.

 

A decision to use licence fee funding to support commercial organizations raises significant risks that the BBC has previously outlined. First, it would risk breaking the unique link between licence fee payers and the BBC. BBC research suggests that the public understand what they are paying for under the current model: 70% of the public spontaneously mention the BBC when asked which broadcasters are funded by the licence fee; prompted awareness rises further, to 86%. Second, it would require that strong accountability mechanisms be put in place for new recipients of public money. Third, it would mix public funding and advertising revenue within commercial organisations, potentially weakening commercial incentives and advantaging some commercially funded news operators over others.

 

In conclusion, the BBC is committed to working with others to find a practical and sustainable solution for the future of regional news. In our view, a partnership-based solution is the best way to maintain plurality in regional news, maximising the value of the BBC's long-term investment in infrastructure and facilities around the UK and increasing the efficiency of public investment. We favour models that enhance value rather than simply transfer it. The Government and regulators must also consider the most effective use of existing regulatory assets to support regional news. At the same time, commercial media must develop new, sustainable business models and approaches to journalism that work across different platforms and match audience expectations.

 

June 2009



[1] Survey of 4,500 licence fee payers. BBC Trust Purpose Remit Survey (BMRB, Feb 07), base: all adults 15+

 

[2] Survey of 4,500 licence fee payers. BBC Trust Purpose Remit Survey (BMRB, Feb 07), base: all adults 15+

[3] Ofcom's CMR, August 2008, pp.279-280.

[4] Market Impact Assessment of the BBC's Local Video Service (Ofcom, Nov 2008), p.88. While this comparison discussed the proposed BBC Local Video areas, these were based on BBC local radio areas and were near identical.

[5] Ofcom's Media Tracker (Apr - Oct 2008); also see similar findings in Market Impact Assessment of the BBC's Local Video Service (Ofcom, Nov 2008)

[6] Ofcom PSB survey, 2007.

[7] Ofcom, New News, Future News report, July 2007, p.48

[8] Redefining Regions. The Future Foundation, 2004

[9] Citizenship Survey statistical release, Department for Communities and Local Government, 2008 found that people feel increasingly connected to the places they live and work in, with 75% now feeling that they belong strongly to their neighbourhood, up from 71% in 2003.

[10] Ofcom, New News, Future News, July 2007, p24. Around 50% of consumers say they are personally interested in events in 'my region/nation' or 'events where I live'.

[11] Beaufort Research (November 2007) ; Electoral Commission's 2006 report on Assembly election participation

[12] ibid, p.121

[13] Ofcom PSB review, Final Statement and Recommendations, Jan 2009.

[14] RAB Commercial Radio revenues.

[15] Market Impact Assessment of the BBC's Local Video Service (Ofcom, Nov 2008), p.18 and p.88

[16] Ofcom presentation on local media (29 March 2009) citing Advertising Association figures.

[17] Ofcom presentation on local media (29 March 2009).

[18] Market Impact Assessment of the BBC's Local Video Service (Ofcom, Nov 2008)

[19] Ibid, pp. 52, 56-57.

[20] Ibid. , p.12

[21] Sage/BBC figures (Jan 2008).

[22] Ofcom Chief Executive (Ed Richard) speech to Government Local Media Summit, 28th April 2009

[23] Analysis suggests that the unique audience to ITV1 regional news is limited: c5% of the annual audience to regional news only watches it on ITV1 (the vast majority (77%) watches regional news on both BBC One and ITV1).

[24] Ofcom has previously estimated that the revenues from the advertising around ITV1's nations and regions news are c15 million per annum (New News, Future News, June 2007).