BBC Licence Fee Settlement and Annual Report - Culture, Media and Sport Committee Contents

5  Content

70.  As well as assessing the additional responsibilities that the BBC has taken on as a result of the settlement, we have also looked at BBC content.

Strategic Review: Initial conclusions

71.  In summer 2009 the BBC Trust decided to undertake a major strategy review to determine how the BBC could most effectively deliver its public service mission for the rest of the Charter period until 31 December 2016. This decision was announced through an open letter to licence fee payers in September 2009. The BBC Trust initiated the first stage of this review by tasking the BBC Executive to conduct its own review and put proposals to the Trust. The BBC's proposals were published in March 2010. The Trust then undertook a three-month consultation period before publishing its initial strategy review conclusions in July 2010. The Trust published its final conclusions in December 2010, just before our second evidence session.

72.  By the time of our first oral evidence session, the Trust had already endorsed the central components of the Director General's proposals, so the broad outline of the strategy review had already become clear. The key outcomes included commitments to:

  • putting quality first;
  • doing fewer things better;
  • making the licence fee work harder; and,
  • setting new boundaries.

73.  Mark Thompson had also used his MacTaggart lecture of 27 August 2010 to expand upon his future vision for the BBC. He stated first that there was much to be proud of in the existing provision of services:

I believe that the real dirty little secret about British television is about how good it is, not how bad.[92]

Highlighting how important it was that the BBC spent as much of the licence fee as possible on high quality content "at a time when other broadcasters are struggling to maintain their origination budgets", he went on to stress that the BBC needed to rededicate itself to this central mission, arguing for a "further significant shift towards distinctiveness" and a need to "create more room for other players".[93] This may be read, perhaps, as a tacit admission that the BBC had strayed into areas that it should not have done.

74.  We explored these themes further in our first oral evidence session, pressing for examples of areas where the BBC intended to do less in order to concentrate on higher quality and distinctiveness elsewhere. Here Mark Thompson mentioned in particular fewer leisure programmes, fewer repeats and reducing the amount spent on acquired programming (programmes neither commissioned by the BBC nor made in-House but brought in a finished state from another supplier) given that there are plenty of other channels catering for this demand.[94] We subsequently obtained from the BBC the information that it spent £93 million on acquired television programming in 2009/2010, and intends to spend between £75-85 million on acquired programming in 2010/2011. This appears to represent a reversal of the previous trend — as spending on acquired programming grew from £88 million to £101 million between 2006/2007 and 2008/2009. A balance must be struck between BBC-generated and acquired programming, as there is clearly a place for the BBC acquiring distinctive, high quality programmes when other terrestrial broadcasters do not wish to bid. Generally, however, we welcome the shift of emphasis away from acquired programming, and trust that the downward trend will continue.

75.  We looked at the emerging plans for radio, where the BBC Executive's proposal to close the BBC digital music channel 6 Music and the Asian Network had been overturned by the Trust. Sir Michael Lyons told us that "the arguments didn't stand up as a result of the consultation analysis we've done" but felt that the proposal had helpfully brought to the fore:

[…] the two big strategic issues sitting behind it. The first of those — the greater distinctiveness of Radio 1 and Radio 2 […] the second issue […] is the absence of a coherent digital strategy — not an issue for the BBC alone.[95]

Mark Thompson accepted that he needed to go back and look at the broad radio strategy.

76.  Aligning with our predecessor Committee, we intend to take a keen interest in the BBC's commitment to spending in the nations and regions. During the first oral evidence session, we also took the opportunity, therefore, to question the BBC on its commitment to fulfilling production quotas in the three nations of Scotland, Wales and Northern Ireland, receiving reassurances that:

The BBC's commitment to it is evidence of the Director General taking up issues that the Trust gave a strong direction on but here you have targets set by the Trust being progressed and being met and a very real and palpable outcome for licence fee payers in the three nations.[96]

We urge the BBC to increase still further its efforts to support the production of quality programmes in the nations and regions when a strong case for doing so can be made.

Strategic Review: Outcome

77.  By the time of our second oral evidence session the BBC Trust had — just — published the final outcome of the Strategic Review. As expected, it put the focus on increasing the distinctiveness and quality of programmes and services while improving value for money. One issue which did strike us was how long it was taking the BBC to implement changes in areas that had long been identified — both by the BBC and outside commentators — as requiring attention, such as the strategy review itself, which had taken well over a year to complete.

78.  As a further example of this tardiness, Mark Thompson confirmed the intent to reduce the amount spent on the BBC website while making it more distinctive. This is not before time. BBC Online expenditure rose by 12% from £178 million to £199 million in 2009/2010. From financial year 2003/2004 through 2009/2010, the BBC spent around £1 billion on BBC online services. This growth has continued despite growing concerns from the commercial sector about the scale of the BBC's online activities. As far back as 2004, a Government review (The Graf Review) concluded that the BBC should redefine the remit and objectives for its online service; include more consistent and transparent links to all relevant commercial and public sources; increase distinctiveness; and introduce a deliberate, precautionary approach to investment. The BBC Trust conducted its own service review of BBC Online in 2008, concluding then that it required firmer editorial control and clarity of purpose. It is striking that, although the Strategic Review confirmed a 25% budget cut for BBC online, the Trust still did not feel able to sign off proposals for change at this time. The Trust finally agreed a new BBC online strategy on 24 January 2011. This is a good example, then, of an area where the BBC has allowed itself, for too long, to depart quite substantially from its public mission.

79.  While we are content with the broad thrust of the BBC Trust's strategic review, we have concerns that the BBC remains slow to implement necessary change. We will monitor closely the extent to which the BBC increases the speed with which it fulfils its strategic review commitments, including implementing improvements to the distinctiveness and quality of its services.

The Strategic Review and the new settlement

80.   There was one alarming feature of the final strategic review documents; the strategy review and the new settlement are not fully aligned. Although the BBC has sought to portray the strategic review as a necessary roadmap for the settlement deal, it can equally be argued that the scope of the settlement has derailed the strategic review in a number of respects. Most strikingly, perhaps, while the strategic review argues strongly for the BBC to deliver better value to its audiences by doing fewer things better, the settlement requires the BBC to take on additional tasks, some of which, as we have seen, are of debatable relevance to its core mission and public purposes.

81.  Slightly more hidden is a further concern. The BBC Trust's December 2010 The BBC's Strategy Putting Quality First document, which summarises the conclusions of the strategic review, contains the following statement:

The BBC's new licence fee settlement changes the picture somewhat. […]In the course of the next two years, the BBC Trust and Executive will therefore need to agree a realistic target for productive efficiencies in the period from 2013/2014 to 2016/2017, and how any remaining gap in funding is best met. That is likely to require a more fundamental review [our italics] of the cost base and the shape of BBC services than was undertaken in the course of the strategy review.

It sometimes appears as if the BBC is in a state of permanent review. We took the opportunity in the second oral evidence session to clarify the extent to which more radical changes to the BBC lay just round the corner. Sir Michael Lyons expressed regret that he had used the term "review" again, but admitted that there was a lot of work still to be done to determine how the priorities identified in the strategy review were going to be delivered against the 16% reduction in budget. Mark Thompson suggested that:

[…] I think we have the direction of travel. We now have the fairly considerable task of turning these broad themes and direction into practical plans for genre and services and platforms.[97]

82.  We pressed further on whether future reviews would produce evolutionary change or a rather more fundamental rethink of what the BBC does. We detected a difference in emphasis from the Director General and the Chairman of the Trust. Mark Thompson appeared to us to favour an evolutionary approach. He pointed out, with reference to the opposition to the BBC's earlier proposal to close 6 Music, that:

[…] the public do not want any diminution of the services offered by the BBC […] So our challenge is that the public want a broad range of services from the BBC; there isn't a single service from the BBC that has not got a powerful constituency out there. They want a broad range of high quality content from the BBC, and our challenge, if you like, is can you meet that public expectation in the context of the reality of the funding the BBC will have over this period?[98]

The risk is that by trying to retain all its services, the BBC ends up spreading itself too thinly, so that quality and distinctiveness suffer. Our predecessor Committee questioned the value provided by BBC Three, including its effectiveness in reaching young people.[99] Mark Thompson was, however, rather dismissive of the suggestion that the BBC might need to reduce its number of channels, arguing that, as a fully digital UK approached, so the underlying value of all the BBC's digital channels increased. He also suggested that the logic for reducing a broad portfolio of channels lay many years in the future.[100] In sum, he thought that the number of digital channels operated by the BBC was a second order issue:

Having ambitious, outstanding content is the key issue. How to make sure the licence is going into the best possible content — of course, there are some costs in having an extra digital channel, the last marginal digital channel. But they are very small economic questions when you compare them to the underlying point, which is making content. That's where the money goes, in the making of content.[101]

83.  Sir Michael Lyons, on the other hand, appeared to us to be more conscious of a need for radical change in order to work within the constraints imposed by the settlement. He noted that the strategy review had concluded that it would be premature to look at the current portfolio of television channels as the public's viewing patterns had not changed significantly. He observed however that the BBC could no longer afford to put off this type of fundamental review:

In the context of a 16% budget reduction, the Trust is clear that we don't have the luxury of that [the portfolio of channels]; it has to be looked at, as indeed does all BBC activity […][102]

84.  On 12 January Sir Michael Lyons wrote to Mark Thompson on the subject of implementing Putting Quality First and the new licence fee settlement.[103] The letter noted that they were in agreement that:

[…] the scale of this challenge requires the BBC to undertake a fundamental review of its cost base and shape of services and activities.

He expected the BBC Executive to bring proposals to the Trust in the summer and that, thereafter, the Trust would:

[…] lead a programme of external consultation with licence fee payers and wider industry to test our understanding of their likely impact. We will aim to finalise our conclusions by the end of the year.

He went on to emphasise that savings "should be targeted in those areas where the BBC's public value is lower" and that there should be no compromising of the pursuit of greater distinctiveness on BBC One, BBC Two, Radio 1 and Radio 2. Finally, he observed that:

We have also previously signalled that this process is a good opportunity to assess how the shape of the BBC's television portfolio as a whole might develop after digital switchover is complete in 2012.

Media reporting interpreted these statements as a clear message that the future of digital channels BBC Three and BBC Four was in doubt.[104]

85.  The main outcomes of the BBC Trust's strategy review are largely underwhelming in that they simply repeat verities such as the importance of putting quality first, ensuring value for money and having boundaries appropriate to its publicly-funded status. Our sense is that the hard choices on content are yet to come, but that they should not be avoided any longer. We will await with interest any indication that the new Chairman of the BBC Trust and the Director General can give us on the future shape of BBC services and their content during our next annual oral evidence session, and look forward to comparing the options considered and the choices made against the values of the strategy review.

92   James MacTaggart Memorial Lecture, speech by the BBC Director General Mark Thompson at the Media Guardian Edinburgh International Television Festival, 27 August 2010 Back

93   Ibid. Back

94   Q68 Back

95   Q70 Back

96   Q61 Back

97   Q150 Back

98   Q151 Back

99   Culture, Media and Sport Committee, Fifth Report of Session 2009-10, BBC Annual Report 2008-09, HC 515, paras 55-63 Back

100   Q154 Back

101   Q154 Back

102   Q153 Back

103   Trust publishes licence fee settlement commissioning note, BBC Trust Press Release, 12 January 2011 Back

104   The Guardian, BBC Trust chair : we may cut back digital channels, John Plunkett, Wednesday 12 January 2011 Back

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© Parliamentary copyright 2011
Prepared 19 May 2011